Surging investment drove on the French economy in the second quarter but a slowdown in consumer spending growth raised questions about the sustainability of the recovery in the euro zone's second largest economy.
State statistics body INSEE said yesterday that French gross domestic product (GDP) grew by 0.8 per cent quarter-on-quarter, confirming last week's flash estimate that consolidated France in its role as the main driver of growth in the 12-nation zone.
INSEE said household consumption rose 0.7 per cent, compared with 0.9 per cent in the first quarter, and confirmed the figures took into account June's 4.2 per cent jump in consumer spending.
Although the relative fall was more than made up for by a strong increase in investment of 1.8 per cent, economists stressed concerns over the strength of the recovery in the second half of the year.
"Overall it's positive, but the sustainability of the pick-up is at stake," said Deutsche Bank economist Mr David Naude.
Mr Jan-Eric Fillieule at CCF added: "The GDP figures confirm economic activity is driven by strong internal demand: consumers must have continued dipping into savings in order to spend.
"Now we need employment to improve in order to consolidate this good first half of the year," he said, adding foreign trade was a worry and could drag down growth.
Reducing unemployment of 9.9 per cent - well above the euro -zone average of 9.0 per cent - is the priority of prime minister Mr Jean-Pierre Raffarin, twice punished heavily by voters this year over his economic policies.
Industry minister Mr Patrick Devedjian said on Thursday that the economy was now growing at an annualised rate of three percent, robust enough to create jobs. But Mr Marc Touati at Natexis Banques Populaire was sceptical, noting technical factors had helped the latest numbers.
"The outlook is not so bright any more, especially on unemployment, a tendency the investment survey issued today confirms," he added.
The warnings took the gloss off government efforts this week to talk up the economy.
Ministers have trumpeted their hopes that growth could sneak above 2.5 per cent in 2004, and France would leave Germany and Italy, whose economies are struggling, in its wake.
Italy recorded second quarter growth of just 0.3 per cent according to preliminary data this month.
The Bundesbank said on Monday that Germany may fail to sustain its modest growth of the first six months and said further rises in record high oil prices posed a serious risk to it. -
