French economy accelerates, stoking debate on ECB tapering

French growth accelerated in the fourth quarter as part of a wider economic expansion in the region that is fuelling a debate about how quickly the European Central Bank should trim stimulus.Gross domestic product rose 0.4% in the October- December period, national statistics office Insee said. That matches the median estimate in a Bloomberg survey and compares with 0.2% growth in the previous three months. Inflation accelerated to 1.6% in January, the most since November 2012, while a separate release showed price growth in Spain surged to 3%.France’s performance in the fourth quarter, along with solid growth in both Germany’s and Spain, means the expansion in the euro area probably strengthened at the end of 2016. With inflation rates rising across the region, a discussion about the ECB’s €2.28tn ($2.4tn) bond-buying programme is set to intensify.“The eurozone is getting good nominal growth and rising inflation, a scenario in which pressure on the ECB is going to increase,” said Michel Martinez, an economist at Societe Generale in London. “There are fewer and fewer people who will understand the need to continue doing quantitative easing.”In the euro area, growth probably accelerated to 0.5% in the fourth quarter from 0.3%, while the inflation rate rose to 1.5% in January from 1.1% the previous month, according to separate Bloomberg surveys. Eurostat will release those data at 11am Paris time.The Austrian economy grew 0.6% in the final three months of 2016, up from 0.5%, the country’s Institute of Economic Research said yesterday. Inflation in Spain surged to 3% this month, the highest level since 2012, according to the nation’s statistics office. German unemployment fell by 26,000 in January to 5.9%, the lowest rate since the country’s reunification.In France, household spending and corporate investment spurred the fourth-quarter expansion, allowing domestic demand to contribute 0.6 percentage point to growth. External trade added 0.1 percentage point, Insee said.The French economy grew 1.1% in all of 2016, compared with 3.2% in Spain and 1.9% in Germany.France’s expansion was dented last year as multiple terrorist attacks caused a drop in tourism and unusual weather hit farm output. Yet by the final quarter, tourism was beginning to revive while low interest rates were spurring construction and tax cuts were driving investment, Martinez said.As a result, sentiment among factory executives climbed to a five-year high and consumer confidence is at its strongest since 2007.“Despite global political risks, 2017 begins with good economic conditions,” Finance Minister Michel Sapin said in a statement.Even so, the unemployment rate remains stuck close to 10%. The lack of job creation and the lagging recovery forced President Francois Hollande to declare in December that he wouldn’t seek re-election.France’s 2017 presidential election is scheduled for two rounds on April 23 and May 7.