France Economy Contracts 0.3% in Q4


In 2012 Q4, French gross domestic product in volume stepped back 0.3 percent, after +0.2 percent the previous quarter. Over the year, GDP growth was null in 2012, after +1.7 percent in 2011.

In 2012 Q4, total domestic demand (excluding inventory changes) weighed down on GDP growth: -0.1 point after +0.1 point. Indeed, households’ consumption expenditure remained sluggish (-0.1 percent after +0.1 percent) and gross fixed capital formation continued to decrease (-0.8 percent after -0.4 percent). Exports decreased in Q4 (-0.6 percent after +1.0 percent), but less strongly than imports whose decline increased (-1.2 percent after -0.2 percent): ultimately, foreign trade balance contributed again positively to GDP growth (+0.2 point after +0.3 point). On the contrary, changes in inventories continued to weigh down on GDP growth in Q4: -0.4 point, after -0.2 point the previous quarter.

Households’ disposable income decreased by 0.5 percent in Q4 (after +0.1 percent in Q3). Wages received by households slightly decelerated (+0.3 percent after +0.4 percent), and social benefits in cash remained dynamic (+0.9 percent after +1.0 percent). But these beneficial effects are overcompensated by the strong increase of taxes on income and wealth (+7.0 percent après +4.0 percent). This dynamic result in the second half is mainly due to measures passed in order to enhance the efficiency of the income tax in 2012, and to exceptional contribution for solidarity tax on wealth at year-end. Furthermore employees’ social contributions accelerated in Q4 (+2.0 percent after +0.7 percent) with the increase of contribution rate and the end of exemptions on overtime.
 
GDP growth’s estimation has not changed since the publication of the first results on February, and is still estimated at -0.3 percent in Q4 and 0.0 percent for the whole year. Nevertheless, some revisions cancel each other out: production in transportation is enhanced with the integration of the road haulage indicator; however the estimation of household consumption has been scaled down with the integration of new indicators.

INSEE | Nuno Fontes | nuno@tradingeconomics.com
3/27/2013 11:47:35 AM