February 28, 2018 / 9:06 AM / a year ago

Investment surge pushed French growth to 2 percent in 2017, strongest since 2011

PARIS (Reuters) - The French economy grew by a stronger than expected 2 percent in 2017, its best performance since 2011, in a year marked by a surprise acceleration in investment from companies and households, official data showed on Wednesday.

FILE PHOTO: Employees work on the assembly line to build Yaris cars at Toyota's automobile manufacturing plant in Onnaing, France, January 22, 2018. REUTERS/Pascal Rossignol/File Photo

Buoyed by rock-bottom interest rates, a broad-based recovery among euro zone peers and lower payroll taxes, French companies bumped up investment to meet surging demand and more confident households returned to the property market.

The 2 percent increase over 2017, a tad higher than the 1.9 percent initially estimated, means France outpaced Britain, which grew by 1.7 percent last year, although gross domestic product fell short of the 2.5 percent in the wider euro zone.

That marked a sharp acceleration from the performance of the previous five years, where the French economy flirted with stagnation, weighed down by mass unemployment and efforts to close a budget deficit via higher taxes.

The French government will take heart in the pick-up in investment, which bodes well for long-term growth.

Companies’ investment increased by 4.4 percent, while households’ jumped by 5.4 percent, mainly on the back of property purchases.

Although President Emmanuel Macron’s pro-business government has pointed at surging confidence since his election, the previous Socialist government has been quick to claim its efforts to cut companies’ payroll costs are bearing fruit.

The European Central Bank, whose bond-buying program has pushed interest rates to record lows, encouraging companies and households to take up cheap loans and mortgages, could just as well take credit.

However, despite a 3.3 percent rise in exports in 2017, foreign trade still shaved 0.3 points off French growth as a whole last year, because of a more rapid surge in imports, at 4.1 percent.

In the fourth quarter, GDP rose by 0.6 percent after growing 0.5 percent the previous three months, INSEE said, leaving its quarterly estimates unchanged.

For a graphic of GDP by contributions: reut.rs/2oQ8Pxu

For further details from INSEE: here

Reporting by Michel Rose; Editing by Sudip Kar-Gupta and Raissa Kasolowsky

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