The announcement that the French economy grew by 0.14% in the third quarter of 2008 has baffled the pundits and delighted the government. While Germany, Italy, Britain and the United States have moved clearly into recession, France has managed to grow its economy, albeit by a small amount.

With a huge smile on her face, Christine Lagarde told F2 TV viewers that the figures would not be as bad as predicted. The key to this relative success would appear to be the French government's determined measures to encourage spending by France’s thrifty consumers.

While the level of British savings, at zero per cent, are the lowest they have ever been since figures were first collected, the French have continued with their traditional tendency to make sure that there is always a cushion between them and financial disaster. The average French savings rate is more than 10% of Gross Domestic Product. While in recent years the rest of the world spent its savings with consequent growth, French consumers kept their money in the bank.

Compared with Germany, France also has the new-found advantage of not being the biggest exporter in the world. At the moment, it is exports which are suffering worldwide more than internal consumption.

It remains to be seen whether this good quarterly figure has merely postponed the recession for six months or whether the governments pro-active measures will defy the international trend
altogether. International forecasts are not encouraging but then a panel of 24 economists predicted that France would fall into recession this quarter and they were wrong.

FRENCH ARE LESS PESSIMISTIC!

Tuesday, 02 December 2008
According to the monthly opinion poll BVA the economic confidence index among French people has increased for the second month running. Last month it was up 12 points.

This month it has increased by a further 4 points. The pollsters stress that this does not mean that the French are victims to the old Rudyard Kipling joke “if you can keep your head when all about you are losing theirs – you don’t know what is going on”. The overall outlook is pessimistic and one employee in two expects redundancies in the coming months. The French are however a lot less pessimistic than in previous months.

It may be that the relatively high level of savings held by French households and their very low level of investment in the stock market are related to the present improvement in sentiment. French private savings are 14% of gross domestic product, according to the European Central Bank – seven times higher than in Britain and the United States.