French Economy

Reuters reports:

France built on an exceptional first-quarter performance, outstripping expectations with another 0.8 percent rise in GDP as consumers filled the shops again.

The 3.2 percent annualized growth rate in France outstripped the United States during the quarter and was a point ahead of the expected euro zone aggregate. First-half French growth also matched Britain -- where the Bank of England has raised interest rates five times since November to keep inflation in check.

[...]

Germany met forecasts with an acceleration to 0.5 percent -- its fastest in three years. But, in stark contrast to France, it continued to be driven almost entirely by exports as consumption was described by the Federal Statistics Office as stagnant.

[...]

While France, Germany and Italy - together accounting for almost 70 percent of total euro zone output - suggest a 0.6 percent forecast for Q2 is now comfortable, the surprise Dutch data has led many to tilt toward a 0.5 percent outcome.

The Netherlands accounts for just six percent of euro zone output however and Spain, which accounts for about 10 percent of the bloc, repeated its 0.6 percent from the first quarter.

[...]

"The rapid French expansion remains the surprise element for us, but it is hard to see that sort of consumption growth being sustained without more job creation or wage growth."

Many see housing trends as a potential explanation for euro zone divergence - with France and Spain having double-digit house price rises and related consumption effects.

Germany and the Netherlands, on the other side of the coin, continue to experience housing recessions and this -- among many other concerns -- is crimping consumption.

[...]

With the United States and China showing signs of slowdown and both oil prices and interest rates rising, the world trade outlook is ebbing before the euro zone has started to create enough new jobs to sustain nascent domestic demand growth.