French exports boost economy despite strikes

A rebound in exports helped French output expand 0.2 percent in the first three months of this year, underscoring the resilience of the eurozone’s second-largest economy after weeks of strike action.

Foreign sales of goods and services rose 1.1 percent, helping offset weak consumer spending after months of industry action. Imports also fell 0.6 percent, meaning trade provided a substantial boost to the economy.

The acceleration was in line with analysts’ expectations and indicates that the economy of the 20-country currency zone is proving stronger than expected after Russia’s invasion of Ukraine raised fears of an energy crisis.

Analysts believe the strength of eurozone growth and inflation figures released today and early next week could decide whether the European Central Bank continues to raise interest rates by half a percentage point or cuts them by a quarter point.

Insee, the French statistics agency, said business investment was weaker in the first quarter, while household spending was flat.

Domestic demand was negative for the second consecutive quarter, even before inventory changes, further weighing on growth. Consumption of French goods fell 0.2 percent in the first quarter, Insee said.

Widespread strikes in protest of pension reform have paralyzed French public transport. The French central bank said earlier this month that the strike hit activity in the transport and storage sectors, as well as food services.

Gilles Moëc, chief economist at French insurer Axa, said Insee estimated that previous strikes caused no more than a temporary 0.2 percentage point hit to gross domestic product, adding that previous disputes had been more disruptive.

The French economy recovered faster than most European countries from the shock of the pandemic, buoyed by generous government support. But it has underperformed last year, when it grew 2.6 percent compared with the eurozone’s 3.5 percent growth.

“In 2022, France was protected, relative to countries like Germany, by its lower sensitivity to energy prices and Chinese demand,” Moëc said.

Energy costs have fallen sharply since the start of the year as China has reopened its economy, easing pandemic-era restrictions. Moëc predicted that if these trends continued, French growth would “probably converge” with other euro area countries.

Earlier this month, the IMF forecast the French economy would grow 0.7 percent this year and 1.3 percent next, slightly underperforming the eurozone overall.

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