French GDP May Have Shrunk Most Since 1974 in Fourth Quarter
France’s economy, the second largest of the 16 countries sharing the euro, may have contracted the most in more than three decades in the last quarter, as the global economic slowdown hit industries like automakers.
The economy probably shrank 1.1 percent in the final quarter of 2008, more than the 0.7 percent contraction estimated last month, the Bank of France said today. That would be France’s biggest quarterly decline since the fourth quarter in 1974 when the economy contracted 1.6 percent, Paris-based national statistics office Insee said. Gross domestic product rose 0.1 percent in the third quarter, Insee said on Dec. 29.
“It will be dramatic: a freefall of exports, flat consumption and investment at a halt as the credit crunch continues,” said Jean-Christophe Caffet, an economist at Natixis in Paris. “So there is no hope for the fourth quarter. But this is specific to the fourth quarter; the French and global stimulus packages may come as a relief in the spring.”
French President Nicolas Sarkozy’s 26 billion-euro ($34.4 billion) economic-stimulus package presented last month to spur the car and construction industries enters into force this week.
The euro region is heading for what may be its worst recession since World War II. The biggest economy in the zone, Germany, may have contracted the most in two decades — between 1.5 percent and 2 percent in the last quarter. The economy of Italy, Europe’s fourth-biggest economy, will this year contract by 2 percent, its worst decline since 1975, the Bank of Italy said yesterday cash advance no fax.
Exports, Investment
The global meltdown is damping exports and hurting corporate investment. The French trade deficit in the first 11 months of the year was 52.5 billion euros, or 16.7 billion euros wider than over the same period in 2007.
Output at French factories and utilities tumbled 2.4 percent in November from the previous month, Insee said Jan. 9. In the year, industrial production fell 9 percent and manufacturing output plunged 11 percent, led by a 35.9 percent collapse in the auto industry, Insee reported.
The government is meeting with all companies in the car industry on Jan. 20 and may unveil “soon after” new support measures and funding to maintain a sector that employs about 220,000 people in the country.
European and French carmakers have shuttered plants and suspended thousands of jobs to reverse a buildup of unsold vehicles as plummeting consumer confidence and tighter credit erode sales. Car sales on the continent dropped 18 percent in December. For 2008 overall, sales dropped 7.8 percent to 14.7 million, the biggest plunge since 1993.
Renault SA said it had cut inventories to 70,000 vehicles from more than 100,000 in September, after slashing production by 50 percent in the fourth quarter. France’s second-biggest automaker needs 9 billion euros to function normally this year, said spokeswoman Frederique de Greves on Jan. 12.
Filed under: money by TheDoor