French growth 'best in 20 years'

Industry is at the heart of France's economic recovery

France's economic growth in the second quarter of 2006 was its best in 20 years, its finance minister has said.

Thierry Breton described the 1.1% expansion of the economy between April and June as "exceptional".

France's gross domestic product (GDP) is now set to grow by 1.9% for 2006 as a whole, official figures suggest.

France's economy has been slowly turning around, and the government has made it a priority to boost growth and cut the unemployment rate.

The previous set of data, from France's national statistics office INSEE, showed GDP had grown by 0.5% in the first three months of 2006.

Analysts say the INSEE predictions for 2006 may be overcautious.

BNP Paribas said full-year growth could be 2.5% with Natexis Banques Populaires predicting an expansion of 2.2% to 2.3%.

Rebound

Business was at the forefront of recovery, said David Naude, senior economist with Deutsche Bank.

"We had seen in the previous quarter a temporary setback in business spending, both investment and inventories," he said.

"There was a risk that the spike in oil prices was going to put businesses on hold, and we see that this was just temporary because we see a big rebound.

"Obviously, France will not sustain this kind of growth rate. But what we're seeing is an upshift in the underlying trend of growth and we don't see yet any signs of a deceleration, at least near term."

Household spending rose 0.7% in the second quarter - partly due to spending on televisions to watch the French national team make its way to the World Cup final.