France fell into mild recession in Q4

The French central bank renewed on Thursday its estimate that France fell into a mild recession at the end of 2012, putting contraction of the economy at 0.1 percent in the fourth quarter after equivalent estimated shrinkage in the second quarter. The latest estimate from the Bank of France differs from data from the national statistics office which suggests that France has just averted recession this year by showing marginal intermittent growth. But together the sets of data suggest that the country is bumping along on the edge of recession when it urgently needs to achieve steady and stronger growth to generate activity, reduce high unemployment and raise tax revenues in a battle to reduce the public deficit. The Socialist government switched the emphasis of its economic policy a few months after coming to power this year, focusing on the need to raise the competitive position of French industry so as to boost exports and reduce a big trade deficit.The central bank stood by its view that the country fell into mild recession on the basis of its latest monthly report in December on the state of activity in the industrial and services sector. The bank's overall assessment of how the figures for the economy in the fourth quarter would turn out was the same as the assessments the bank made in November and October. The bank has already said that it believes the economy shrank by 0.1 percent in the third quarter from output in the second quarter. The technical definition of recession is two quarters running of contraction of output in a quarter from output in the previous quarter. However, the national statistics institute INSEE estimates that in the third quarter the economy grew by 0.1 percent after contraction of 0.1 percent in the second quarter. And INSEE said in its latest estimate of activity in the last quarter of the year, published on December 20, that the economy had shrunk by 0.2 percent from output in the third quarter. This would mean that the fractional growth in the third quarter kept the country out of recession, according to the INSEE figures. Meanwhile, INSEE reported on Thursday that French industrial output had rallied by 0.5 percent in November from the level in October when it had contracted by 0.6 percent on a revised basis from output in September. INSEE had estimated initially that in October, industrial output had shrunk by more, by 0.7 percent. INSEE also said that consumer prices had risen by 0.3 percent in December and by 1.2 percent, excluding the price of tobacco, on a 12-month basis. INSEE said that the increase had been driven mainly by seasonal increases in the prices of services and manufactured products. The latest figure means that inflation in France was below the average of 2.2 percent in the eurozone in December, on the basis of a first estimate by the European Union statistics office Eurostat.