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French Growth Outpaces Germany, But Slumps In Fourth Quarter

The French economy grew by 1.4% in 2005, preliminary official data showed on Feb. 10, a faster rate of expansion than in neighboring Germany but slower than forecasts by economists. The figure was also below a growth projection of 1.5% -2% given by the government and reiterated by French Finance Thierry Breton mid-January.

Analysts said that a slowdown in consumer spending, a reduction in stock levels by companies and sluggishness in the automobile sector were important factors in explaining weaker-than-expected activity at the end of the year.

Economists gave additional explanations for the lackluster performance in 2005. "It (the economy) has been mainly underpinned by household consumption in 2005, which lost steam at the end of year," said an economist at BNP Paribas, Mathieu Kaiser. "Household spending on manufactured goods increased by only 0.2% quarter-on-quarter in the fourth quarter."

He also said that companies had likely continued to draw down their stocks, thereby placing fewer orders for new products, as inventory levels had reached record highs in previous quarters, Kaiser said.

Separately on Feb. 10, data also indicated that French industrial production had fallen by 0.3% in December compared with November, reversing a strong gain the previous month. Production in November compared with October had surged by 3.1%.

Copyright Agence France-Presse, 2006

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