January 31, 2020 / 6:31 AM / 17 days ago

French economy unexpectedly contracts 0.1% in Q4 - INSEE

PARIS, Jan 31 (Reuters) - The French economy unexpectedly contracted slightly in the final quarter of last year as consumer spending and business investment growth slowed and companies drew down inventories, official data showed on Friday.

The surprisingly sharp slowdown is a blow for President Emmanuel Macron who has so far been able to point to resilient growth and job creation to justify his pro-business reform agenda.

The INSEE statistics agency said the euro zone’s second-biggest economy shrank 0.1% in the period from the previous three months, when it grew 0.3%.

The weak year-end performance confounded economists’ expectations who on average had forecast growth of 0.2% in the quarter. None of the 33 economists polled by Reuters had expected anything weaker than 0.1% growth.

INSEE said that consumer spending growth had slowed to 0.2% in the quarter from 0.4% in the previous three months, despite a raft of measures last year to boost households’ purchasing power. Meanwhile, business investment growth slowed to only 0.3% from 1.6% in the third quarter.

Overall, domestic demand contributed 0.3 percentage points to growth in the quarter, but that was erased by the -0.4 percentage point impact of companies drawing down inventories rather than producing new goods. The contribution of foreign trade was flat.

The economy’s year-end performance means that over course of 2019 it grew 1.2%, which was nevertheless in line with the government’s forecast despite the unexpectedly weak year end. (Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta)

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