French economy contracted in Q2

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This from Bloomberg

The French economy, the euro- region’s second largest, contracted in the second quarter for the first time in five years as exports declined and companies cut investments.

Gross domestic product fell 0.3 percent from the first quarter, when it rose 0.4 percent, national statistics office Insee in Paris said today. Economists expected growth of 0.1 percent, according to the median of 24 estimates in a Bloomberg News survey. In the year, the economy grew 1.1 percent.

French households are cutting spending as oil-driven inflation erodes their purchasing power just as companies struggle with a stronger euro making their goods less competitive abroad. In Germany and Italy, the economies also contracted in the second quarter. European Central Bank President Jean-Claude Trichet said on Aug. 7 that the six months through September will be “particularly weak” in the euro- region economy.

“Exports, investments and consumption have all fallen off a cliff,” said Sebastian Wanke, an economist at Dekabank in Frankfurt. “That’s a disastrous combination. It’s difficult to see signs of recovery at all.”

Growth in the first quarter was revised down from a previously reported 0.5 percent.

In the economy of the 15 nations sharing the euro, GDP probably contracted 0.2 percent in the second quarter from the previous three months, when it expanded 0.7 percent, a Bloomberg survey shows. The European Union’s statistics office in Luxembourg will release the report at 11 a.m. today.

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Evidence is mounting that the Eurozone is in recession. We won’t have to wait long for confirmation. But, it does beg the question as to how the U.S. expects to stay afloat when its export markets are contracting and exports are the only thing going for the U.S. economy. By the way the French government is using the same playbook as the Spanish and the American.

French Economy Minister Christine Lagarde rejected talk of recession this morning. Spealing on French radio, she said: “It is out of the question to talk of recession.”
Times Online, 14 Aug 2008

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