French Economy Quickens in Second Quarter, Helped by Exports, Investment

France’s year-old economic expansion accelerated more than economists estimated in the second quarter as export demand buoyed manufacturing and investment.

Gross domestic product increased 0.6 percent in the three months through June, from a revised 0.2 percent in the first quarter, Paris-based statistics office Insee said today. Economists predicted a gain of 0.5 percent, according to the median of 14 forecasts gathered by Bloomberg News. GDP expanded 1.7 percent from a year earlier.

France’s economy has expanded for five straight quarters after a yearlong recession that was the worst since World War II. Total investment by companies and households increased for the first time in two years, according to today’s statement, contributing to a rise in domestic demand as exports climbed.

“These numbers are very encouraging,” French Finance Minister Christine Lagarde said on Europe1 radio. “I hope we’re entering a virtuous circle” where private sector investment leads to job creation, she added.

The economy of Germany, France’s main trading partner, expanded at the fastest pace in two decades in the second quarter as the global recovery boosted exports and companies stepped up investment. GDP adjusted for seasonal effects, rose 2.2 percent from the first quarter, data released today showed.

Domestic Demand

In France, while exports rose 2.7 percent in the three months through June, domestic demand helped lift imports 4.2 percent. The widening trade deficit shaved 0.4 percent of GDP, Insee said today.

Economists are concerned that the French recovery may falter as President Nicolas Sarkozy seeks to cut the country’s budget gap to 6 percent of GDP next year from 8 percent in 2010. Household demand accounts for about 58 percent of the French economy, and consumer spending has fallen in four of the first six months of the year.

“The problem looking ahead is that we are already seeing some weakness in consumer spending before the government has even begun cutting,” said Gilles Moec, an economist at Deutsche Bank AG in London. “Even if budget consolidation hasn’t started yet, it’s on everybody’s lips and it’s having a very negative impact,” Moec said.

Jobless claims are near a four-year high and reviving inflation is limiting purchasing power, compounding consumers’ concern about the budget cuts. Consumer prices based on European Union methodology increased 1.9 percent from a year earlier in June, Insee said today in a separate release.