French GDP Contracts in Q2 2008

The French economy contracted for the first time in more than five years in the second quarter as exports declined and companies cut spending. Gross domestic product in what is the euro-region's second-largest economy fell 0.3 percent from the first quarter, when it rose 0.4 percent, according to the latest data from the French national statistics office Insee. That's the first drop since the fourth quarter of 2002.




The French economy contracted for the first time in more than five years in the second quarter as exports declined and companies cut spending. Adding to signs of slowdown, industrial production, which accounts for 15 percent of the French economy, fell for a second month in June. French business confidence declined to the lowest in more than three years in July and manufacturing shrank.





European companies are being hurt by the euro's 10 percent ascent against the dollar over the past year, which is making exports less competitive abroad. Over the same period, crude oil prices have increased 62 percent, sapping the spending power of both companies and consumers. Growth in the first quarter was revised down from a previously reported 0.5 percent.



Adding to signs of slowdown, industrial production, which accounts for 15 percent of the French economy, fell for a second month in June. French business confidence declined to the lowest in more than three years in July and manufacturing shrank.


Exports declined 2 percent from the previous three months, when they rose 2.4 percent, today's report showed. Consumer spending rose 0.1 percent in the three months through June after falling 0.1 percent in the first quarter. Corporate investments declined 1 percent in the second quarter after rising 1.2 percent in the January March period.

So this seems to be largely about reduced exports, increased imports and declining investment. External trade contributed a negative 0.5% to growth in the quarter.