France's economy stagnated for a second straight quarter in the three months to June, indicating the euro zone's recovery is losing momentum and undermining French President François Hollande's economic and fiscal program.
The euro-zone's second-largest economy failed to record any growth for the second quarter in a row in the period April through June, statistics agency Insee said Thursday. Economists polled by The Wall Street Journal had expected a 0.1% GDP expansion in the second quarter from the first. Compared with the same period of 2013, gross domestic product was up just 0.1%.
French GDP figures are the first in a string of potentially gloomy releases Thursday. Economists expect figures for Germany to record a contraction in the second quarter, dragging the euro zone as a whole into a second straight quarter-to-quarter slowdown.
The weak recovery leaves the currency bloc lagging other advanced economies such as the U.S. and the U.K. The sluggishness is keeping unemployment high and inflation low, increasing pressure on the European Central Bank to lower its outlook for economic growth and take more action to bring inflation closer to its 2% target from around 0.4% currently.
In France, poor second-quarter growth threatens to upend the government's plans to bring down its deficit only a month after Paris adopted a revised budget to try and stay on track.
Mr. Hollande's government is banking on 1% growth this year to bring the deficit down to 3.8% of GDP, but economists say a huge rebound will be needed in the second half if Paris is to get anywhere near its targets. Insee already forecast in June that the economy will grow only 0.7% this year, and even that looks optimisticnow as the statistics agency's outlook was based on the assumption that growth would pick up to 0.3% a quarter in the second quarter.
French officials have indicated they will revisit their forecasts once the second-quarter GDP figures are published. Prime Minister Manuel Valls has warned his ministers they will face a challenging time when they return to work after the summer break.
The GDP statistics from Insee on Thursday showed France's domestic economy was held back by weak investment offsetting a rise in consumer spending. Exports growth also slowed to zero in the second quarter and foreign trade was a drag on GDP growth.
Write to William Horobin at William.Horobin@wsj.com
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(END) Dow Jones Newswires
August 14, 2014 02:05 ET (06:05 GMT)
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