French economy at a standstill in the first quarter of the year

The French economy came to a standstill in the first quarter, official estimates showed on Friday, and economists said the outlook for the rest of the year was not encouraging, despite some gains in consumer spending in May.

The report that the economy grew not at all in the first three months of the year came a day after data showed the number of jobless rose to a record high in May, casting fresh doubt on government projections of 1 per cent growth this year.

The 1 per cent jump in consumer spending in May beat the consensus forecast of a 0.4 per cent gain. It was the highest reading since November of last year.

But, looking at the data in detail, consumption of manufactured goods actually fell 0.4 per cent, its first drop in three months, dragged down by lower spending on food and cars.

The overall reading was boosted by spending on energy, which climbed 8 per cent after a 3.3 per cent drop in April, as spending on heating returned to normal after contracting because of higher-than-usual temperatures.

Consumption of household goods also rose. But that was probably a one-off effect linked to consumers buying bigger television before the World Cup, analysts said.

Looking at the first quarter, INSEE said that the household savings rate rose to 15.9 per cent in the first quarter from 14.7 per cent in the final three months of 2013, not a sign of optimism on the part of households.

In a bit of good news, the corporate profit margin as a proportion of value added rose slightly to 30 per cent from 29.5 per cent.

Producer prices contracted by 0.5 per cent in France in May and 0.2 per cent on the year, INSEE data also showed.

Reuters