French growth slows in first quarter, but shrugs off election uncertainty
FILE PHOTO - Construction cranes are seen in front of Paris landmark, the Eiffel Tower, May 25, 2015. Picture taken May 25, 2015. REUTERS/Jean-Paul Pelissier
PARIS French growth slowed in the first three months of the year as more households spent less money on heating bills through a period of unusually warm winter weather and with little obvious impact from the run-up to an election, official data showed on Friday.
Consumer sentiment has held steady at near a 10-year high while business confidence has been running at close to six-year records despite one of closest and most unpredictable presidential elections in decades which will be decided in a run-off vote on May 7.
Despite the uncertainty surrounding the election, the euro zone's second-biggest economy grew 0.3 percent, the INSEE national statistics agency said in its first estimate for the quarter.
The result marked a slowdown from the final three months of last year when the economy grew 0.5 percent, and it was marginally below economists' average forecast for 0.4 percent.
Though consumer spending growth slowed nearly to a standstill, it was in large part due to lower heating bills and weaker spending on clothes amid unseasonably warm weather.
Business investment grew at the fastest pace in a year as companies rushed to take advantage of a tax writedown on outlays for new equipment before its expiration in mid April.
"It looks as if political risk didn't affect the French economy that much," Morgan Stanley economist Daniele Antonucci said in a research note.
"Our base case is that the second round too delivers a market-friendly outcome, such that Emmanuel Macron wins the presidency," he added.
Macron, a centrist former economy minister who wants gradual reform, is tipped by polls to win the runoff vote against far right leader Marine Le Pen who wants France to abandon the euro after the two qualified in a first round of voting last Sunday.
The GDP report showed that household investment, which is primarily made up of real estate purchases, remained firm. That is helping fuel a recovery in the construction sector, with housing starts at a nearly 4-1/2 year high.
Overall internal demand contributed 0.4 percent to growth in the quarter, INSEE said. Meanwhile, companies rebuilding depleted inventories added a further 0.6 percent, but that was wiped out by foreign trade, which knocked 0.7 percentage points off growth due to weak exports, especially of Airbus aircraft.
For a graphic of GDP by contributions: reut.rs/2oQ8Pxu
(Reporting by Leigh Thomas; Editing by Andrew Callus)