French economy ‘to shrink in first quarter’
By Wire News Sources on February 9, 2009
If the economy does contract as the central bank expects, after widely expected shrinkage in the fourth quarter, the economy will have shown two quarters running of negative growth which marks recession.
The economy contracted in the second quarter of last year but achieved growth of 0.1 percent in the third quarter, thereby narrowly averting recession.
But economists, including government economists, expect data for the fourth quarter to show a clear contraction.
The official statistics institute INSEE is to publish on Friday its first data for growth in the whole of 2008.
Most economists, and the government, expect that the figure for gross domestic product in the fourth quarter will be very weak, showing a contraction of about 1.0 percent.
Economy Minister Christine Lagarde said last week that conditions in the fourth quarter were the worst “ever seen”, referring to a “collapse of industrial production, particularly in November and December.”
Forecasts so far put growth for the whole of 2008 at 0.7-0.8 percent.
Lagarde said that the government was waiting for publication of these results to revise its forecasts for growth in 2009, which stand so far at 0.2-0.5 percent.
The minister has also acknowledged that she would be “very surprised” if the French economy grew in 2009, thereby implying that she would be surprised if it were not in recession.
“All of the countries in the eurozone are at about minus 2.0 (percent for forecast growth), and the European Commission gives us minus 1.8 percent, the IMF (International Monetary Fund) minus 1.9 percent, so no-one should have any illusions,” she said.
“We have to be realistic and watch the figures.”
The bank also published its index for business sentiment in industry which stood at 70 in January from 67 in December, showing a slight rise in activity.
Business leaders questioned in the survey said that a rise of production in January in the auto sector, in which many production lines had been closed down at the end of last year, and investment goods had been matched by a fall in output of semi-finished goods.
The survey found that inventories of finished goods had risen slightly and were far above desirable levels.
In January, a slowdown of activity in the service sector eased overall, but remained marked in the area of part-time work.
The survey signalled that the slowing of activity and demand in the services sector would continue in the near future.
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