PARIS: French growth accelerated more than expected at the start of the year with the strongest increase in consumer spending since 2004 and a pick-up in business investment.

The economy grew 0.5 per cent in the first quarter, beating even the most optimistic forecast in a Reuters poll, as consumers splurged on clothes, cars and housing equipment, the INSEE national statistics agency said in a preliminary estimate of gross domestic product (GDP) on Friday.

Consumer spending was up 1.2pc over the three months, with higher spending on heating after a mild end to 2015, also offering a boost and offsetting the impact of a global slowdown that hurt exports.

If consumers led the way in the quarter, however, economists particularly took heart in a 1.6pc rise in business investment, the strongest increase in five years. Investment by companies in the manufacturing sector surged by 3.3pc, the highest since the spring of 2006.

“It’s very good news, it shows companies are back on the offensive,” said Alexandre Mirlicourtois at Xerfi.

“It gives more solid grounds to the recovery, which is not only relying on consumption.”

“The rise in fixed investment growth was particularly noteworthy,” Raphael Brun-Aguerre of JPMorgan agreed, adding that he expected decent gains in the coming quarters.

Although a lower euro, rock-bottom interest rates and cheap energy prices have boosted French growth just like its eurozone peers, some also attribute the pick-up in investment to government measures.

Paris last year introduced the possibility for companies to write off 40pc of their investments in productive assets, a one-off measure which was supposed to stop in April but was extended by a year.

“The expected extension of the tax write-off certainly had a positive effect,” Economist Axelle Lacan at COE Rexecode said.

The stronger French performance also contrasted with a slowdown in the United States and Britain, which both reported lower growth than France this week.

When expressed as an annualised growth rate like the American method, French GDP rose by 2.2pc compared with 0.5pc in the US.

France, however, has grown 3.5pc accumulatively since its pre-crisis peak, compared with 10.2pc for the US and 7.3pc for Britain, which was hit harder than France by the financial crisis in 2008 but rebounded more strongly.

Published in Dawn, April 30th, 2016