Economic growth in the euro zone is set to pick up steadily this year, Bank of France chief Christian Noyer said in an interview published on Wednesday, adding that euro zone interest rates were appropriate for now. Noyer, a member of the European Central Bank's policy- setting Governing Council, said the growth rate in France was close to two percent. He did not say whether he was referring to a forecast for 2004 as a whole, or an annualised rate. "This strengthens the scenario of the gradual recovery of the French economy and in the whole of the euro zone," Noyer said in the interview with the daily Le Parisien. France, the euro zone's second biggest economy after Germany, flirted with recession last year and the government is predicting a recovery with 1.7 percent growth this year.
Earlier this month, the ECB held interest rates unchanged at 2.0 percent and played down the chances of a cut in the next few months, saying a modest economic recovery remained on track. Noyer said the ECB would do everything in its power to protect the purchasing power of households, but hinted it would maintain interest rates unchanged for the time being. "For the moment, we consider them adequate to maintain price stability," he said, referring to the ECB's mandate to keep a lid on inflation in the 12-nation euro zone.
FAVOURABLE OUTLOOK
Echoing the ECB's view on the growth outlook, the Bank of France said on Wednesday its latest business survey showed the outlook for business activity was favourable in all sectors. The French central bank said the survey pointed to 0.5 percent growth in the second quarter after 0.5 percent growth in the first three months of the year -- forecasts unchanged from a month earlier. Some economists were less upbeat. "I am not convinced that we will be able to maintain the same level of growth in the second quarter as in the first quarter," said Olivier Gasnier at Societe Generale. "We could see a reduction in consumer spending in the second quarter."
Reports earlier this month showed consumer confidence in France nudged ahead in March to its highest point since mid-2003, and that industrial output rose 0.8 percent in February. However, the rate of expansion in France's dominant services sector slowed in March and some economists have said the country's nascent recovery remains weak. "I remain cautious," said Emmanuel Ferry, economist at investment house Exane. "Company finances are mediocre and that means there won't be a recovery in investment in the short term, and job cuts will continue." The conservative government has made economic growth a key target since a reshuffle prompted by a crushing defeat in regional elections last month, but is committed to reducing the bulging public deficit to below the European Union ceiling.///