U.S. News

French Statistics Agency Predicts Economic Rebound in 4th Quarter

France looks set to weather a global economic slowdown and rebound slightly in the fourth quarter, thanks to vigorous household consumption, the national statistics agency predicted Tuesday.

In its latest quarterly review of the euro zone's second-largest economy, Insee upped its forecast for French gross domestic product in the fourth quarter 2006 to 0.9 percent from 0.6 percent.

But the agency cut its forecasts for year-on-year growth to 2.1 percent from 2.3 percent, following a flat third quarter.

The zero growth in the third quarter surprised economists and Insee alike, and revived concerns about France's overall sluggish economy and calls for reform ahead of a pivotal presidential election next year.

Insee said falling oil prices and lower taxes slated for early 2007 should buoy French domestic demand and growth in the first six months of 2007.

The agency's projections were somewhat more optimistic than those of government officials, who estimate that France will grow by 0.6 percent to 0.8 percent in the fourth quarter. The government predicts 2006 growth at 2 percent to 2.5 percent.

In its latest report, Insee expects consumer spending, a key driver for French growth, to rise 0.7 percent in the fourth quarter, up from 0.6 percent in the third quarter. Consumer spending for 2006 as a whole is set to rise by 2.8 percent, it said.

"Thanks to households' solid purchasing power, France should weather the early 2007 economic slowdown better than the rest of the euro-zone," the report said.

Eric Dubois, Insee's head of economics research, said evidence suggested that the industrial sector is over its slump.

Insee expects France's industrial production to increase 0.9 percent in the fourth quarter, after slipping 0.1 percent in the third quarter of 2006.

The agency predicted that French unemployment rates would drop to 8.2 percent by June 2007, from 8.8 percent in October, its lowest rate in five years.

Insee's forecasts were based on an euro exchange rate of US$1.30, and a retreat of the price of a barrel of Brent crude oil towards an average of US$60.

On Monday, the euro was trading at US$1.32, while light, sweet crude for January delivery was trading at US$61.72.