PARIS: France posted growth of 0.5 percent in the second quarter as the delivery of a huge ocean liner underpinned the strongest increase in exports in six years, official data showed on Friday. The export surge helped offset a drawdown in company inventories and slower business investment, INSEE said in its preliminary growth estimate for the three months through June. The result, the third quarter in a row that the euro zone’s second-largest economy grew 0.5 percent, was in line with the average forecast in a Reuters poll of 27 economists. Following the economy’s performance over the first half of the year, France should have little trouble meeting and possibly surpassing the government’s growth forecast of 1.6 percent.
INSEE estimated the economy has growth momentum of 1.4 percent behind it already, which means that is how strong growth would be for the full year if there were no growth for the rest of the year, which is highly unlikely. “We expect growth to remain healthy during the second half of the year, boosted by gradually improving labor market situation, muted inflation and solid external demand,” IHS Markit economist Diego Iscaro. “Confidence indices suggest that firms and households are also more upbeat about the economic outlook, which should also help to support domestic demand,” he added. Business and consumer confidence survey surged in the wake of the election in May of President Emmanuel Macron on a pro-business reform agenda, though they have since eased back. INSEE said growth in consumer spending accelerated to 0.3 percent in the second quarter after only 0.1 percent the previous quarter while business investment slowed to a rate of 0.5 percent from 2.1 percent as a temporary tax writedown for layouts on equipment expired in April. Boosted by the delivery of a 700 million euro ($819 million)luxury ocean liner, exports surged 3.1 percent in the quarter, the strongest rate in six years and outpacing by a wide margin import growth of only 0.2 percent as France bought less oil from abroad.
The liner was built at the STX France shipyard which the French government said on Thursday it would nationalize to prevent an Italian takeover. The French move, motivated by strategic defense and job concerns, has angered the Italian government. Overall foreign trade contributed 0.8 percentage points to gross domestic product in the second quarter and domestic demand added a further 0.4 percentage points. Meanwhile, companies running down inventories subtracted 0.6 percentage points after a big build-up of stocks the previous quarter.