FRENCH ECONOMY SURPRISES WITH SECOND-QUARTER JUMP
Received Friday, 11 August 2006 09:22:00 GMT

PARIS, Aug 11, 2006 (AFP) - The French economy grew by 1.1-1.2 percent in the second quarter, official data showed on Friday, putting the economy on course for growth this year of 2.0-2.5 percent, analysts said.
    The figures caused widespread surprise and the government welcomed them as the best for 20 years, saying they pointed to an annual growth rate of 3.0 percent.
    Analysts said that the figures put growth within the 2.0-2.5 percent range forecast by the government and attributed the surge to catching up in the fields of exports and investment, and also to strong household consumption.
    The data, from the official statistics institute INSEE, showed that the economy grew by 1.1-1.2 percent in the second quarter. This means that it is set for growth of at least 1.8-1.9 percent this year provided there is no contraction.
    Finance and Economy Minister Minister Thierry Breton said that figures were the best France had achieved for 20 years and that growth was running at an annual rate of 3.0 percent.
    "The figures published by INSEE this morning are quite exceptional.
    "The French economy is doing better, it's doing well, it's even doing very well," Breton said on France Inter radio.
    "All the trends are at go. This is why unemployment is falling so much in France."
    The minister added that quarterly growth had exceeded by far forecasts of 0.6-0.7 percent.
    The outcome, which is double first-quarter growth of 0.5 percent, means that gross domestic product is certain to grow by a minimum of 1.8-1.9 percent for the year even if there is no further growth, provided the economy does not shrink.
    The figures were seasonally adjusted and could be revised at a later date. INSEE publishes three sets of quarterly figures, beginning with initial estimates and ending with detailed results.
    At finance house Asteres, economist Nicolas Bouzou said that "at last France is getting on to the train of world growth".
    The quarterly figure was "enormous" given the low potential of the French economy, he said.
    This was a reference to an economic concept of the "potential" of an economy, being a measure of the efficiency and flexibility of an economy, its ability to grow without generating inflationary bottlenecks.
    Bouzou said that the causes of the growth would be known soon, but probably lay in strong household consumption, a rise of exports drawn by recovery in Germany, France's biggest trading partner, a pick-up of industrial investment which had been lagging for some years, and re-stocking of finished goods.
    "It is clear that the French economy will have performed this year within the range foreseen by the government, that is at a rate of 2.0-2.5 percent."
    At BNP Paribas, economist Mathieu Kaiser said that the outcome was "far above our expectations" and meant that "over the year, growth will probably be closer to 2.5 percent than 2.0 percent."

The outcome, which is double first-quarter growth of 0.5 percent, means that gross domestic product is certain to grow by a minimum of 1.8-1.9 percent for the year even if there is no further growth, provided the economy does not shrink

According to The Tocqueville Connection, The insiders Web source for French news and analyses