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French GDP slows to 1.3 percent in 2nd quarter

French GDP slows to 1.3 percent in 2nd quarter

French growth slowed in the second quarter as business investment faltered, with the economy expanding 1.3 percent from the previous year, the national statistics agency Insee said Tuesday.
From the previous quarter, the economy grew 0.3 percent after 0.5 percent expansion in the first three months of the year. That fell short of analyst expectations and followed soft second-quarter industrial output figures published last week.
The persistent strength of the euro _ which recently has hovered near record highs against the U.S. dollar _ is making European exports more expensive.
Exports of goods rose 1.1 percent, while imports rose 2.1 percent in the second quarter, Insee said.
The government expects gross domestic product to grow between 2 percent and 2.5 percent in 2007 and has been looking to spur economic growth to create jobs. Parliament has been working on reforms like cutting taxes on overtime pay and lowering the cap on taxes on the wealthy.
Finance Minister Christine Lagarde has forecast growth of between 2.2 percent and 2.75 percent next year. The Organization for Economic Cooperation and Development is less optimistic, projecting growth of 2.2 percent both this year and next.
The second-quarter cooling in France coincides with a slowdown in Germany, where the economy also expanded 0.3 percent after 0.5 percent in the first quarter. The pace of growth in the two largest economies of the euro region will add to pressure on the European Central Bank to keep borrowing costs unchanged.
The ECB, which sets interest rates for the thirteen countries using the euro, has hinted it will raise its benchmark rate to 4.25 percent in September.
Turmoil in financial markets has pushed up inter-bank lending rates above the ECB's level, raising questions about that objective. The ECB has injected emergency liquidity into the banking system for four successive trading days to ease fears of a credit crunch linked to dubious U.S. mortgages.


Updated : 2021-10-29 02:47 GMT+08:00