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France narrowly avoids recession, GDP unexpectedly rises 0.2 pct in third quarter

Paul Cinquin, left, a Beaujolais Nouveau producer, clinks glasses with customer in Lille, France Thursday, Nov. 15, 2012. THE CANADIAN PRESS/AP, Michel Spingler

PARIS - France narrowly avoided falling into recession in the third quarter, official figures showed Thursday, but analysts warn the rebound may be short-lived.

The French economy, Europe's second-largest, hasn't recorded growth since the third quarter of last year and had been widely expected to start its slide into recession in the third quarter.

Instead, Insee, the national statistics agency, said GDP rose 0.2 per cent in the July to September period from the previous quarter.

If the quarterly rate had been negative, then France would be in recession as the agency revised down figures for the second quarter to show a 0.1 per cent contraction. It had previously said growth was stagnant, as it had been for the two preceding quarters. A recession is technically defined as two consecutive quarters of falling output.

Fixing France's economy amid a European-wide crisis is President Francois Hollande's biggest challenge. He has promised to rein in massive government spending and reduce the deficit, largely by raising taxes.

But those measures have weighed on growth, and the country has watched unemployment tick steadily up as a raft of companies announced layoffs in recent months. The jobless rate now stands at 10.8 per cent, according to European statistics.

France's third-quarter bounce rested heavily on an increase in household spending, but economists warn that consumption is unlikely to hold up with such high unemployment.

"As confidence surveys continue to fall, Q4 should be much more difficult," analysts at BNP Paribas said.

Hollande has promised to restore the country's competitiveness by offering a tax break to companies that kicks in next year, but many are still waiting to see how he will reform the country's stringent labour rules. Those rules make firing difficult and thus make employers reluctant to hire, even once the economy starts growing.


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