French economy remains resilient in face of Paris attacks
Official figures show investment rebound supports fourth-quarter growth
French Finance minister Michel Sapin arrives before a meeting with the Iranian president at the Elysee Palace. Photograph: Stephane de Sakutin/Getty Images
French growth slowed only slightly in the final quarter of 2015 despite the November attacks by Islamist militants in Paris, as a rebound in business investment to levels not seen before the financial crisis of 2008 offset a consumer spending slump.
Official data out on Friday showed the euro zone’s second-biggest economy grew 0.2 per cent in from the previous three months, in line with economists’ average estimate and slowing marginally from 0.3 per cent in the third quarter. Despite the economy’s resilience shown after the attacks that left 130 dead, France is struggling to generate a recovery strong enough to make inroads against unemployment, running at an 18-year high of 10.6 per cent.
In a preliminary reading of gross domestic product for the quarter, INSEE said household spending dropped 0.4 per cent from the previous quarter in the wake of the attacks by gunmen and suicide bombers in Parisian bars, a stadium and a concert hall that killed 130 people.
However, in a monthly breakdown, the attacks’ impact on consumer morale proved to be fleeting, with household spending rebounding 0.7 per cent in December from the previous month after slumping 1.4 per cent in November.
Unseasonably warm temperatures also kept spending on energy down heading into the winter months. Meanwhile, businesses increased investment by 1.3 percent in the fourth quarter, reaching levels not seen since the start of the financial crisis in the first quarter of 2008.
The jump was the strongest sign yet that the Socialist government’s bet on €40 billion in payroll tax cuts to fire up corporate investment may be beginning to pay off. Companies also kept rebuilding inventories, contributing 0.5 per cent to GDP, while external trade subtracted 0.3 per cent as imports of transport materials surged, INSEE said. Household investment, which is primarily made up of real estate purchases, returned to growth as the homebuilding sector pulls out of a slump that had been weighing on overall growth.
For the whole of 2015, the French economy grew 1.1 per cent, in line with the government’s estimate and the fastest pace since 2011, but less than the minimum 1.5 percent rate that economists say is necessary to get unemployment falling. “The recovery needs to pick up speed in 2016 and allow us to get more jobs, that’s our priority” finance minister Michel Sapin said in a statement after the GDP report.