Thierry Breton, France’s finance minister, admitted on Wednesday that the rebound in the French economy would be weaker than expected in the fourth quarter after a disappointing drop in industrial production figures for November.
Mr Breton said French growth in the final quarter of 2006 would be between 0.6 and 0.8 per cent, an improvement on the third quarter, when the economy stagnated, but lower than the 0.9 forecast from Insee, the state statistics agency.
The size of the fourth-quarter rebound in France’s economy is especially important to politicians, as it will be the penultimate set of quarterly economic results against which the government is measured before presidential elections start in April.
Economists, however, said the unexpected fall in industrial production by 0.2 per cent in November meant they were increasingly sceptical about the chances of achieving even the new cautious target announced by Mr Breton.
“Industrial production probably fell over the quarter, and manufacturing production may have hardly increased. This lends support to our expectation of GDP growing by 0.5 per cent in the fourth quarter,” said Mathieu Kaiser of BNP Paribas.
Mr Kaiser said the finance minister’s new targets would “now prove difficult to achieve as they were based on the assumption industrial output would rebound”. Mr Breton has set a target of 2-2.5 per cent for growth in 2006.
A slump in car production, reflecting falling sales for both Peugeot Citroen and Renault last year, was the main cause for the drop in industrial activity. But production of manufactured goods and consumer goods also fell between October and November.
Meanwhile, France’s trade deficit reached a new record high of €23.4bn for the year to the end of November, as buoyant consumer spending fuelled a further rise in imports of manufactured goods.
Mr Breton, speaking on French television, also tried to politicise the sensitive issue of fuel prices. He blamed regional authorities, which are almost all in the hands of the opposition Socialists, for raising taxes on fuel by the maximum amount they could, claiming this had prevented consumers from benefiting from a recent drop in crude oil prices.
“I have discovered, to my dismay, that the quasi-totality of French regions have increased the TIPP (a fuel tax) to the maximum they could, which means that while consumers should have recovered at least 2 centimes on petrol… (this sum) was taken by the regions,” he said.
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