French Growth Slows at Year End as Terrorism Hurts Spendingby
Air France, Accor saw drop in demand following attacks
Investment posted strongest increase of year in quarter
France’s recovery slowed in the fourth quarter as terrorist attacks kept tourists away and discouraged consumers from spending.
Gross domestic product grew 0.2 percent in the final three months of 2015, national statistics office Insee said in a statement on Friday. That matches the prediction of economists in a Bloomberg survey and compares with 0.3 percent in the previous quarter.
Households held off spending and companies including Air France-KLM Group and hotelier Accor reported reduced demand in the wake of the Nov. 13 attacks that killed 130 people in and around Paris. Yet with corporate investment expanding at its fastest pace in at two years, the fourth quarter may prove to be a temporary dip.
“This is a classic case of the details being much better than the headline,” said Frederik Ducrozet, an economist at Banque Pictet in Geneva. “The best news is that investment is picking up. Consumer spending down is not a big worry.”
Corporate investment rose 1.3 percent, its biggest quarterly increase since the fourth quarter of 2013.
Household spending, which accounts for 55 percent of the economy, fell 0.4 percent in the quarter, a decline that was cushioned by a 0.4 percent increase in government expenditure.
The euro area’s second-largest economy continues to lag its neighbors. Growth was 1.1 percent in the full year, compared with 1.7 percent in Germany and 2.2 percent in the U.K. The U.S. reports fourth-quarter GDP later Friday.
With more than 10 percent of France’s workforce unemployed, President Francois Hollande declared last week that the nation faces an “employment emergency.” Critics, including rating companies and the European Commission, say the Socialist leader’s plan to address the situation fails to do enough to fix the underlying problems that are holding back job creation and growth.
“Like previous reforms, they do not in themselves address the structural inflexibility in the labor market,” Fitch Ratings said in a note Jan. 20.