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French growth to recover in second half of 2018, INSEE says

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PARIS (Reuters) – French economic growth is set to pick up in the second half of the year but will struggle to meet the government’s growth target, the INSEE stats agency forecast on Thursday.

The euro zone’s second-biggest economy is on course for growth this year of 1.6 percent as a recovery in household income helps offsets a slowdown in the first half of the year, INSEE said in its quarterly outlook.

The estimate was marginally less optimistic than the 1.7 percent the government was expecting this year and marks a slowdown from the 2.3 percent recorded last year.

INSEE had previously forecast 1.7 percent, and it said growth could still reach that if households ended up spending rather than saving extra cash from two tax cuts taking effect in the second half of the year.

France eked out quarterly growth of only 0.2 percent in the first two quarters of the year as strikes curbed activity and a warm spring kept energy spending low.

INSEE estimated growth would more than double to 0.5 percent in the third quarter and come in at 0.4 percent in the final three months. The tax cuts could push it even higher.

Cuts in payroll and housing taxes in the second half of 2018 were expected to increase growth in household disposable income to 1.7 percent in the fourth quarter from 0.5 percent in the third quarter.

Slower inflation would also help keep more money in households’ pockets. It is forecast to average 1.9 percent over the whole of the year after peaking at 2.2 percent in the third quarter.

INSEE said that unemployment was expected to keep easing over the course of the year to stand at 8.9 percent at the end of December.

(Reporting by Yann Le Guernigou and Leigh Thomas, editing by Larry King)

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