France set to bounce back from second quarter economic contraction

Jake Cordell
Follow Jake
Night view of Paris
More tourists visit France than any other country in the world (Source: Getty)

The French economy contracted in the second quarter of the year, new figures have revealed, though a strong bounceback should help the economy avoid a recession.

The size of the economy shrunk 0.1 per cent between April and June, French stats body Insee declared this morning. That was worse than earlier estimates, which suggested the economy flat-lined over the period.

Household consumption and business investment were both down, Insee found, with preparations for and the first three weeks of Euro 2016 failing to provide a boost in the face of strike action against employment reforms.

However, the economy should bounce back in the third quarter of the year to avoid two consecutive quarters of negative growth. Purchasing managers' index (PMI) scores out this morning hit a 15-month high, with analysts suggesting it may be enough to beat the Banque de France's official forecast of a 0.3 per cent expansion in the third quarter.

The composite PMI, which combines output across the different sectors of the economy, came in at 53.3, up from 51.9 in August. A reading above 50 represents expansion.

Jack Kennedy, a senior economist at IHS Markit, which compiles the PMI data, said: "French private sector output growth strengthened at the end of the third quarter, reaching its joint-fastest pace in over five years.

"That was thanks to an improved performance from the dominance service sector, offsetting manufacturing stagnation. The data raise hopes of a firmer GDP print for the third quarter."