France Joins European Good Growth Club

June 1, 2016Franceby EW News Desk Team

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French economic growth impressed economists, who were expecting weakness alongside poor growth in America.  France’s economy, however, saw a 0.6% growth in GDP in the first quarter, according to new a report by France’s National Institute of Statistics and Economic Studies (INSEE). The strong growth was partly attributed to improved trade thanks to a stronger U.S. dollar, which has made French exports more attractive to consumers at home and abroad.

In total, France’s GDP rose to 555.4 billion euros in the first quarter of 2016, with exports rising 0.8% on a year-over-year basis. Imports rose at an even faster rate, climbing to 171.6 billion euros, or 1.3% higher than the same period a year ago.

French consumers are also seeing more disposable income in a trend that largely began last year. In 2015, disposable income grew by 1.4% in the country, according to INSEE, the fastest growth rate since 2011. That is driving French consumers to spend more, helping final consumption expenditure rise 1.6% on a year-over-year basis.

While the data was much better than economists expected, weakness was still seen in the foreign trade balance, which hurt GDP growth in addition to negative changes to inventories.

France is targeting 1.5% GDP growth in 2016, which President Francois Hollande has promised in several speeches urging the French to allow further trade liberalization. One such move to allow freer trade is the Transatlantic Trade and Investment Partnership (TTIP), which is broadly disliked in France and Germany by a majority of voters. The French government has nonetheless begun negotiations, requesting changes to dispute settlement language in the treaty.

France’s strong growth helps it join Germany in a group of recent European outperformers. After years of relative weakness, both of the largest continental EU nation states have seen growth accelerate handsomely. Earlier in May, Germany announced that its economy grew 0.7% in the first quarter of 2016, more than twice the 0.3% growth the nation saw at the end of 2015.

Domestic investment is largely driving Germany’s economy, while domestic consumers are largely helping France’s economy.

Economists have expected broad improvement in economic growth throughout the European Union, helped in part by weak growth in 2015, a stronger U.S. dollar making exports more attractive, and cheap oil encouraging more consumption and investment. Additionally, improvements in the labor market in Germany and France are expected to cause wage levels to rise and unemployment to fall.

Many European nations are still struggling with extremely high unemployment, with youth unemployment reaching or exceeding 50% in Portugal, Spain, and Greece.

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