French fourth quarter GDP exceeds expectations, boosted by consumers

02-15-2010 09:08

The French economy grew faster than estimated in the last quarter of 2009, boosted by consumer spending and less destocking by companies than before, according to today’s figures. French GDP advanced 0.6% quarterly in the fourth quarter of 2009, beating forecasts for a 0.5% growth, while the third quarter showed an adjusted 0.2% rise, the French National Institute for Statistics and Economic Studies (INSEE) reported.

Gross domestic product

Jean-Louis Mourier, economist at Aurel BGC, commented: “Unlike the very negative data in Germany, these are rather optimistic figures.”
The German gross domestic product remained unchanged in the last quarter of 2009, while economists had expected a 0.2% increase. The French economy contracted 2.2% last year, which is the worst performance since the Second World War.
French household consumption jumped 0.9% in the last quarter of 2009, following a 0.1% rise in the previous quarter.

Car scrappage scheme

Nevertheless, economists remain cautious since the recent figures are partly the result of strong car sales that was boosted by a car scrappage program, which was created to help the economy to overcome the worldwide financial slump.
The car scrappage scheme expires this year and car producers such as Renault have proclaimed an insecure 2010.

Stock variations

Stock variations contributed by 0.9% to the gross domestic product growth, the French National Institute for Statistics and Economic Studies added.
The INSEE report showed that companies have continued to decrease stocks but at a slower pace than before.
French industrial output dropped unexpectedly in December, which shows that companies failed to replenish their stocks in anticipation of an increase in demand. “The GDP would have declined by 0.3% without stocks. The contribution of stocks to the GDP growth does not indicate that companies have filled up warehouses,” according to Xerfi economist Alexander Law.

Imports - exports

Imports gained 3.3%, stimulated by the increase in consumption. Exports performed weaker, rising only 0.5% following a1.8% climb in the third quarter.

Employment

Consumers went on shopping spree regardless of negative employment figures. Non-farm payrolls fell 0.4% in the last quarter, according to a separate INSEE report. Employment will recover before the end of 2010, the French president stated. However, analysts are concerned that the labor market could become damaged and may affect household spending if the situation in the job market continues its negative trend.
The growth of the economy may lose pace in the beginning of 2010, as a result of the expiring scrappage program in combination with joblessness.
Dominique Barbet, economist at BNP Paribas, commented: “The first quarter is expected to show a weaker economic expansion. The job market data demonstrate that France isn’t out of the financial slump yet. Employment data were gloomy, as French employment dropped for the seventh consecutive quarter, which will eventually have a strong impact.”