France's economy grew at its slowest pace in more than a year in the third quarter as consumer spending fell and rising oil costs crimped global demand. Gross domestic product, the value of all goods and services, slowed to 0.1 percent from a revised 0.6 percent in the previous three months for Europe's third-largest economy, Paris-based statistics office Insee said today. Economists polled by Bloomberg News expected 0.4 percent growth, according to the median of 30 forecasts. ``We have to admit that the slowdown was stronger than we expected,'' said Michel Devilliers, Insee's chief forecaster, said in an interview. He said full-year growth was likely to be about 2.2 percent, less than its 2.4 percent forecast on Oct. 6. Growth in some of France's biggest export markets, Germany, Japan and the U.K., is also tapering off. Consumer demand at home, which boosted first-half expansion, fell in the third quarter as unemployment near a four-year high hurt sales at companies including carmaker PSA Peugeot Citroen and Carrefour SA, Europe's biggest retailer.
Bonds Gain
European bonds rose after the French report. France's 4 percent note due in October 2014 rose 0.07, or 70 cents per 1,000 euro ($1,289) face amount, to 101.21 at 10:02 a.m. in Paris, according to Barclays Plc. The yield fell 2 basis points, or 0.02 percentage point, 3.84 percent. Insee, which doesn't publish annualized figures, will provide a breakdown of French GDP next Friday. For the first quarter in five, France failed to outpace Germany. Germany, Europe's largest economy, reported yesterday third-quarter GDP rose 0.1 percent. Today's number, the lowest since the second quarter of 2003, was ``very disappointing,'' Laure Maillard, a Paris-based economist at CDC-Ixis, said in an e-mail comment. ``Our best guess is that the surprise came from the inventories contribution, which could be more negative than expected.''
Insee lowered its first-half growth estimate and lifted its 2003 figure to 0.6 percent from 0.5 percent. Second-quarter growth was 0.6 percent, down from 0.7 percent, and first-quarter growth was 0.7 percent instead of 0.8 percent. The euro's increase to a record against the dollar is also threatening exports. European Central Bank President Jean-Claude Trichet said Nov. 8 the euro's recent appreciation is ``not welcome.'' The currency rose above $1.30 for the first time Nov. 10. It was little changed at 1.2927 in Paris. ``The issue of 2005 is what will happen with oil prices and the exchange rate,'' said Insee's Devilliers. ``The exchange rate will weigh much more. The risk everyone is citing is that a strong decrease of the dollar will have an inevitable impact on 2005 growth.''
Forecasts Cut
ECB Chief Economist Otmar Issing said Nov. 10 oil prices that have climbed 52 percent the past year would translate into slower-than-anticipated growth in 2005 among the 12 countries sharing the euro. The ECB, which has left its benchmark rate at a six-decade low of 2 percent since June last year, forecast on Sept. 2 that the region will expand about 2.3 percent in 2005 after 1.9 percent this year. The International Monetary Fund cut its 2005 growth forecast for France to 2.2 percent from 2.5 percent on Nov. 3, citing the surging cost of crude oil. It trimmed its prediction for German growth in 2005 to 1.5 percent from 1.8 percent a day earlier. ``The slowdown is steeper than expected,'' said Stephane Deo, an economist at UBS AG in Paris. ``We expect global growth to slow, so exports are bound to decrease next year.'' He said he expects to lower his 2.5 percent forecast for 2004 French growth and that European growth will likely slow next year.
European Slowdown
The GDP of the euro region probably slowed to 0.4 percent in the three months ended in September, from 0.5 percent the prior quarter, according to the median of 41 forecasts. Luxembourg- based Eurostat is due to release the figures at 11 a.m. With unemployment in France at 9.9 percent, consumers pared spending on manufactured goods such as cars by 0.7 percent in the third quarter, the first such drop in five quarters, Insee said Oct. 21. Spending on manufactured goods accounts for about a quarter of total consumer spending, which in turns make up for 54 percent of French GDP. ``We had a soft spot in the summer as consumer spending was a bit sluggish and exports weren't great either,'' said Philippe Waechter, chief economist at Natexis Asset Management in Paris, which oversees the equivalent of $90 billion. ``Businesses are keeping wages and jobs in check.''
French industrial production dropped 0.1 percent in the third quarter from the previous three months as Peugeot closed a plant in August, the statistics office said Nov. 10. French real estate remains one of the few buoyant parts of the economy, underpinned by falling borrowing costs. French housing starts rose 19.3 percent in the third quarter.
Possible Rebound
Confidence among French manufacturers and executives in services rose to a 3 1/2-year high in October, Insee surveys showed this month, suggesting they expect a rebound in the fourth quarter. ``The world market remains firm, with growth continuing at a satisfactory pace,'' said Maurice Levy, chief executive officer of Publicis Groupe SA, in a statement on Nov. 2. European Aeronautic, Defense & Space Co., Europe's largest aerospace company, said on Nov. 4 it tripled third-quarter net income and raised its 2004 earnings forecast after its Airbus SAS unit delivered more planes and the space unit posted its first profit.
The U.S. economy, the world's largest, grew at a 3.7 percent annual rate in the third quarter, rebounding from the second quarter's 3.3 percent growth, the Commerce Department said on Oct. 29. Economists surveyed by Bloomberg News expect a fourth quarter slowdown to 3.5 percent, according to a median of 65 forecasts. The Bank of France predicted on Oct. 14 that the French economy will expand by 0.7 percent in the fourth quarter from the third, based on its monthly survey of about 12,000 retailers and manufacturers. It predicted 0.6 percent growth in the third quarter at the time. //www.bloomberg.com