France slips into shallow recession

PARIS Wed May 15, 2013 5:04am EDT

A homeless man named Didier watches French President Francois Hollande on France 2 television in Andernos, southwestern France, March 28, 2013. REUTERS/Regis Duvignau

A homeless man named Didier watches French President Francois Hollande on France 2 television in Andernos, southwestern France, March 28, 2013.

Credit: Reuters/Regis Duvignau

PARIS (Reuters) - France entered a shallow recession in the first three months of the year as the economy contracted by 0.2 percent because of weak exports, investment and household spending, preliminary data from the INSEE statistics agency showed on Wednesday.

The data - which marks France's first recession in four years - is further bad news for the Socialist government after the number of jobless people hit an all-time high in March.

French growth has faltered as raging unemployment undermines the confidence of both consumers and businesses, which are struggling to cope with government belt-tightening.

INSEE said investment contracted 0.9 percent in the first quarter, with business investment down 0.8 percent, while exports contracted for the second quarter in a row, shrinking by 0.5 percent.

Household consumption dropped by 0.1 percent, contracting for the first time since the second quarter of last year despite higher spending on energy due to a particularly cold winter.

A Reuters poll of 23 economists had an average forecast for the 2 trillion euro ($2.60 trillion) economy to contract 0.1 percent in the first quarter.

Recession is defined as two consecutive quarters of contracting GDP. The French economy shrank by a revised 0.2 percent in the final quarter of last year.

Most private sector economists say the economy would be lucky to grow 0.1 percent this year, as President Francois Hollande's government forecast last month that it would.

In light of the weak economic outlook, the European Commission has offered France two extra years to bring its public deficit in line with an EU limit of 3 percent of GDP, but is seeking firm commitments to more reforms in exchange.

($1 = 0.7705 euros)

(Reporting by Ingrid Melander; Additional reporting by Leigh Thomas; Editing by Pravin Char)