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No cheers for French economy

Thursday, November 21, 2013 - 02:00

Nov 21 - The Euro zone's fragile recovery stumbles on yet more signs of weakness in its second largest economy, France, where farmers are protesting against a new round of taxes. David Pollard reports.

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It's the third Thursday of November and under French wine law that means one thing. Beaujolais Nouveau - the first wine of the year's harvest. After a good summer, this vintage should have a rich bouquet and a lively character. Unlike the French economy. Latest surveys show business activity at a four-month low. And manufacturing at a six-month low. Both were at a level which indicates a contraction. Economists like Simon Smith of FXPro had hoped for better. SOUNDBITE (English) Simon Smith, Head of Research, FXPro: "It's suggesting sort of bigger structural issues for France and headwinds ahead so it's, you know, potentially it could be worse and we could see another downturn in GDP in the fourth quarter." But these farmers at a dawn blockade outside Paris are just one group saying structural reform is destroying the economy. They say a planned hike in sales tax - along with a new levy on road freight - will cost thousands of jobs. And that opposition to austerity is spreading. SOUNDBITE) (French) Christophe Lerebour, Farmer, saying: "Today it's the farmers, tomorrow it will be truck drivers, after that private sector employees, so the government will have to be very careful about how it's going to deal with these crises." Reform or not, jobs growth remains the elusive holy grail. France - like many euzo zone states - is still nudging record highs for unemployment. Rob Dobson of Markit says there's little sign of improvement. SOUNDBITE (English) Rob Dobson, Senior Economist, Markit "Outside of Germany, that job creation problem is still a big problem and when a lot of those countries are experiencing very high double digit unemployment rates they really want to see some of that jobs growth coming in soon to improve the domestic market position." Until that happens, the outlook for France continues to muddy the picture for the euro zone as a whole. Service sector activity this month was at a three month low - and contracting. But manufacturing - thanks in large part to Germany - gave the highest reading for five months. Overall, the euro zone appears to be growing - but at a much lower rate than economists have been expecting.

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No cheers for French economy

Thursday, November 21, 2013 - 02:00