French GDP grinds to a halt as household incomes stagnate

Tim Wallace
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FRENCH economic growth slowed to a crawl at the end of 2011, official data confirmed yesterday.

GDP edged up by 0.2 per cent in the final quarter of the year, slightly slower than the 0.3 per cent gain in the previous three-month period.

For the year as a whole the economy expanded 1.7 per cent, up from 1.4 per cent in 2010.

That low level keeps French growth well below that of other developed economies – the G20 as a whole expanded by 0.7 per cent in the final quarter of 2011, 0.9 per cent in the previous quarter and 2.8 per cent in the year as a whole.

Nonetheless, it is stronger than Germany, which contracted by 0.2 per cent in the three-month period, and the UK’s GDP which fell 0.3 per cent in the quarter.

Purchasing power only grew 0.1 per cent, after accounting for inflation, while household spending – traditionally the engine of French growth – expanded by 0.2 per cent.

A spokeswoman for President Nicholas Sarkozy welcomed “signs of recovery, suggesting the economy is reaching the end of the tunnel.”

However, economists were less optimistic.

“We expect French GDP to remain flat in the first half of 2012 driven by weak domestic demand,” said Barclays Capital’s Fabrice Montagne.

“The deterioration in the labour market since June 2011 and sticky energy prices are weighing on household disposable real income while further fiscal consolidation will depress government consumption. We believe the recovery will come only later this year and develop throughout 2013.”