Photographer: Christophe Morin/Bloomberg

French Economy Grows Fastest in Year; Spain Beats Forecasts

  • French first-quarter GDP rises 0.5%, Spanish GDP up 0.8%
  • ECB President Draghi struggling to lift euro-area inflation

The French and Spanish economies grew faster than expected in the first quarter, suggesting some momentum in the euro area’s expansion.

Growth in France accelerated to 0.5 percent from 0.3 percent, beating the 0.4 percent projection in a Bloomberg survey, statistics office Insee said on Friday. In Spain, GDP increased 0.8 percent, maintaining its pace of growth from the previous quarter and also exceeding the median forecast of analysts.

The euro-region economy probably grew 0.4 percent in the period, according to analysts, though the better-than-predicted national numbers mean there’s a chance it may now come in higher.

The euro-area GDP report will be published at 11 a.m. Paris time alongside inflation data that’s forecast to show that prices in the region are falling again. While the economy has shown consistent growth for the past three years, global deflationary pressures are hampering European Central Bank President Mario Draghi’s efforts to revive price growth.

“Euro-area GDP looks on course to surprise on the upside,” said Frederik Ducrozet, an economist at Banque Pictet & Cie in Geneva. “For the ECB, the message on this will be that everything they’ve put in place is helping the recovery and what is needed is more time for the impact to be seen.”

Moderate Improvement

Draghi said last week that the economy is “moderately improving,” though downside risks remain. The ECB ramped up stimulus in March in a renewed effort to push inflation back to its goal of close to 2 percent. In France and Germany, the euro area’s largest economies, consumer prices fell an annual 0.1 percent in April.

The French GDP report showed that consumer spending rose 1.2 in the first quarter. Business investment jumped 1.6 percent, its biggest increase in five years, helped by 40 billion euros ($46 billion) in tax cuts over the course of four years and a short-term tax break that allowed companies accelerated amortization in the current fiscal year.

There are signs that the recovery is starting to feed through into the labor market for the first time since President Francois Hollande took office four years ago. Jobless claims fell by 60,000 in March to 3.58 million in March, a one-year low. Finance Minister Michel Sapin was quick to take credit.

“This is solid growth,” he said in a statement. “Output is increasing and translating into more jobs and a drop in unemployment.”

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