[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Friday, 18 February, 2005, 13:38 GMT
Consumers drive French economy
Champs-Elysees in Paris
The French economy is looking up but still faces tough challenges
France's economic growth accelerated in the last three months of 2004, driven by consumer spending, a report shows.

Gross domestic product (GDP) rose by 0.8% in the fourth quarter compared with the previous three month period, the statistical office INSEE said.

That expansion pushed annual growth to 2.3%, the fastest rate in two years.

Consumer spending was up by 1.2% in the fourth quarter, and there was also a rebound in business investment that gave the recovery an extra shove.

Not quite perfect

Analysts warned that France was still facing challenges and was unlikely to keep expanding at its current pace.

Consumer spending is still high. But French households have spent their savings to consume
Marc Toutai, Natexis Banques Populaires

"France still has a strong economic growth," said Marc Toutai, an economist at Natexis Banques Populaires. "But, if we check the figures in detail, there's a problem."

"Consumer spending is still high. But French households have spent their savings to consume.

"France can't sustain a high growth rate without an improvement in the job market. There's too much of a gap between growth and employment."

The unemployment rate is currently stuck at about 10%, and is proving difficult to bring down despite government efforts.

Another worry is that demand in Germany and Italy, two of France's main trading partners, is sluggish.

Growth worries

Despite the concerns, analysts pointed out that France was outperforming the majority of its European counterparts and that its economy was looking more robust than in previous years.

As well as strong domestic demand, exports climbed by 1.3% in the fourth quarter - the biggest increase in foreign sales for a year.

"It's an economic growth that seems well balanced," said Nicolas Claquin, an analyst at CCF.

"In the beginning of 2004, growth was mainly driven by consumer spending. Here it gets contributions from investment and exports, though household consumption is still strong.

"But we expect overall economic growth to fall to 2.0 percent in 2005."

Mixed bag

The economic picture emerging from Europe as a whole has been mixed, and the latest eurozone figures offered little in the way of clues.

Industrial production in the 12 countries sharing the euro grew by 0.5% in December from November, according to figures released on Friday. The figure was the first increase in output for three months, but less than many analysts had forecast.

A separate report showed that inflation in Germany, Europe's biggest economy, slowed sharply in January.

Its consumer price index dipped by 0.4% from December, but was 1.4% higher than in the same month a year earlier.

Q&A: What's behind French strikes?
18 Jan 05 |  Business
France's economic growth slowing
12 Nov 04 |  Business
France 'unaffected' by oil surge
17 Oct 04 |  Business

The BBC is not responsible for the content of external internet sites


News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific