Central bank slashes French fourth-quarter growth estimate on protests

PARIS (Reuters) - French growth is set to slow close to a standstill in the final quarter as waves of anti-government protests hit business activity, the central bank estimated on Monday, downgrading its outlook.

A vandalized truck is seen the day after clashes during a national day of protest by the "yellow vests" movement in Bordeaux, France, December 9, 2018. REUTERS/Regis Duvignau

The Bank of France forecast the euro zone’s second-biggest economy would eke out growth of only 0.2 percent in the quarter from the previous three months, down from 0.4 percent in a previous estimate and from that rate in the third quarter.

Executives surveyed for the central bank’s monthly business climate indicator said that the protests, which have hit supply chains and retail sales, had weighed on activity in November.

Its business climate indicator for the manufacturing sector slipped to a four-month low of 101 in November from 102 in October with auto and food industry companies reporting an impact from the protests.

Manufacturers’ capacity utilisation fell to the lowest point since May while production, delivery and hiring growth all stalled out, the survey found.

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Meanwhile, the indicator for the service sector was stable at 102 though firms said that overall demand was the weakest since August 2016 with restaurants, transport firms and car reporting particularly weak business.

The retail sector has been left reeling after protestors rampaged through central Paris on key pre-holiday shopping days. French retail federation estimated the sector had lost out on about 1 billion euros in revenue.

The “yellow vest” revolt was inspired by planned fuel tax hikes - now scrapped - that protestors said would add to the cost of living at a time of weak wage growth.

Named after the fluorescent safety vests that all French motorists must carry in their cars, the movement’s protests have triggered some of the worst unrest seen in the capital since the 1968 student riots.

Prior to the protests, economists had expected French growth to pick up in the second half of the year as tax cuts aimed at boosting purchasing power took effect, and thus consumer spending.

Reporting by Leigh Thomas; editing by Michel Rose