Recession to hit French economy

The French economy will shrink by 0.3% in the third four-month period of the year - technically putting the country into recession.

Despite its predictions, government statistics agency Insee warned against using the word ‘Recession’ too prematurely - noting that overall the French economy will have grown 0.9% by the end of 2008.

The definition of a recession is two consecutive four-month periods (trimestres) of negative growth.

While France experienced a drop of 0.1% in its second trimestre, its performance in the first ensures that by the end of the year, economic growth will be positive although markedly smaller than the past two years.

In 2006 the economy grew by 2.4% and in 2007 by 2.1%.

The head of the economics department of Insee Eric Dubois said the drop in growth had been “extremely marked”.

He said household consumption, the traditional growth motor of the French economy, had stalled because of diminishing spending power.

The agency has said an upshot of this was that inflation was being kept low at 2.4%, especially since fuel prices dropped and stabilised from their summer peaks.

On top of this Mr Dubois said the economy would be hit by the weakening jobs market with the loss of 52,000 jobs in the second half of the year and an unemployment rate of 7.4% by the end of 2008.