France confirms 0.1 pct contraction

PARIS / MILAN - Agence France-Presse

A French job seeker looks at information leaflets as she visits a National Agency for Employment. Another bad quarter would put France in recession. AFP photo

France’s economy is set to contract by 0.1 percent in the third quarter, the central bank confirmed yesterday, in a forecast of further trouble for the eurozone’s second-biggest economy.

This projection came simultaneously with fresh figures on Italian recession.

If confirmed, it would be France’s first contraction since it came out of recession in 2009 and follows zero growth for the past three quarters.

If followed by another negative quarter it would signal the French economy has entered a recession, which is commonly defined by economists as two consecutive quarters of contracting activity.

A forward-looking survey of business activity, the Purchasing Managers’ Index compiled by survey firm Markit, has been running for months below 50 points, which indicates a likely contraction.

Markit said last month that French “PMI data currently suggest contraction is on the cards for” the period from July to September.

French President Francois Hollande said over the weekend that he expected economic growth to be “barely above zero” for 2012.

The government has forecast 0.3 percent growth for the year, while the OECD last week revised down its forecast for French 2012 growth to 0.1 percent.

Italy’s economy shrank by 0.8 percent in the second quarter, official figures showed Monday, as the recession-hit country struggled to pull itself out of a slump despite a government growth plan.

Italy’s gross domestic product (GDP) was down 2.6 percent from a year earlier, the National Statistics Institute (ISTAT) said.

Italy’s economy has been shrinking since the third quarter of 2011.

Austria’s economy, meanwhile, grew by 0.1 percent in the second quarter from January-March, the official WIFO economic institute said yesterday, revising down the figure from an initial estimate of 0.2 percent. After GDP grew by 0.5 percent in the first quarter, the institute predicted the economy would continue to slow in the coming months.