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Economy growing at fastest rate in six years

National statistics agency says improved business and consumer confidence the key drivers in growth

France's economy is growing faster than expected - prompting the country's national statistics agency to boost its growth forecast for the year.

The Institut national de la statistique et des études économiques (Insee), now forecasts that the French economy will grow 1.8% this year, 0.2% more than its prediction in June and the fastest growth rate for six years.

Insee now expects 0.5% growth in the third and fourth quarters of the year - an end-of-year rate that experts have said has been 'unheard of' since 2012, and the fifth quarter in a row that growth in France has hit that level.

The latest figures are a further improvement on those reported in September's edition of Connexion, in which we revealed tourist numbers were at a record high and employment at its highest level for 37 years.Insee predicted 1.6% economic growth in GDP in 2017, compared to 1.1% in 2016.

It is good news for the government, as it works to keep its European Union pledge to drag the public deficit below the EU limit of 3%. It is aiming to keep public spending below 2.9% of GDP this year.

Both households and companies are ramping increasing their spending due to low interest rates and relatively high business confidence, Insee said in its latest quarterly report.

Optimism is particularly high in the private sector, despite the end of a tax incentive for businesses to invest in their production processes. Insee reports that business investment has jumped to 3.9%, half a point more than in 2016, and the highest level since 2011, as companies expand to meet increased demand.

Insee also expects the unemployment rate to drop to 9.4% from 10% at the start of the year, with private businesses employing 208,000 more people than in 2016.

As well as increased business confidence - prompted by the election of President Emmanuel Macron in June and the labour reforms that the government has pushed through - household confidence is soaring, figures show.

Household investments - including property purchases - are set to reach 5% this year, an 11-year record, Insee said, as private-sector wages go up on average 1.9% - although an expected rise in inflation to 1% has cut the rate of increase in consumers' purchasing power.

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