Shock stagnation in French economic growth

French economic growth unexpectedly stagnated in the third quarter with no increase in gross domestic product. It is bad news for Prime Minister Dominique de Villepin’s government heading into next year’s presidential elections and undermines the growth predictions of Finance Minister Thierry Breton. He said the figures were not good, but he remains optimistic.

The sharp slowdown is in contrast to the strong growth of 1.2% between April and June. Breton’s ministry had forecast full-year growth of around 2.3%.

French industrial production was down by 0.1% during the third quarter but it fell by 0.9% in September. Other figures from the French national statistics office Insee underscored the fact that consumer spending, rather than trade or industrial output, has been the main driving force for growth in the country.

The latest data cast doubt on the strength of European expansion and will dampen speculation about further interest rate increases next year by the European Central Bank.

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