July 29, 2016 / 5:40 AM / 3 years ago

French second quarter growth unexpectedly grinds to a halt on weak consumer spending

PARIS (Reuters) - French economic growth stalled unexpectedly in the second quarter on weak consumer spending and investment in a blow to President Francois Hollande’s claims the economy is getting stronger, official data showed on Friday.

Shoppers hold bags with clothing purchases on the opening day of operations by retailers Abercrombie & Fitch outside their Paris store on the Champs Elysees May 19, 2011. REUTERS/Benoit Tessier/File Photo

The result fell short of economists expectations for growth of 0.2 percent from the previous quarter, and was even worse than the lowest estimate in a Reuters poll of 34 analysts for 0.1 percent.

It also marks a sharp slowdown from the first quarter when the economy grew 0.7 percent, the strongest rate in nearly three years. The INSEE statistics office revised that figure up from a preliminary estimate of 0.6 percent.

Finance Minister Michel Sapin said the “disappointing” figures” reflected exceptional factors like strikes at refineries in addition to the slowdown from the particularly strong first quarter.

He said the government was nonetheless sticking with its 2016 growth forecast of 1.5 percent.

Nine months from a presidential election, the figures will do little to convince voters that the economy is gaining momentum as Hollande claimed in his Bastille Day interview earlier this month.

Traditionally the main driver of French growth, consumer spending showed no growth at all in the quarter, which was hurt by floods, strikes and violent street protests over a contested labor law.

The Euro soccer tournament offered little boost to consumer spending with most of the ticket purchases recorded already in the first quarter figures, INSEE said. Spending on food and hotels was also down in the quarter.

Meanwhile, business investment fell 0.2 percent from the previous quarter, when many companies had rushed to take advantage of a tax write-off on some investments before its expiration. It was later extended for a year.

While domestic demand was flat, foreign trade added 0.3 percentage points to growth as imports fell more than exports despite, INSEE said. However, that boost was wiped out by companies running down their stocks, subtracting 0.4 percentage points.

Reporting by Leigh Thomas; Editing by Richard Lough

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