VZCZCXRO7306
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #1233 0870836
ZNR UUUUU ZZH
R 280836Z MAR 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 6048
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUCNMEM/EU MEMBER STATES

UNCLAS PARIS 001233 
 
SIPDIS 
 
SIPDIS 
 
PASS FEDERAL RESERVE 
PASS CEA 
STATE FOR EB and EUR/WE 
TREASURY FOR DO/IM 
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER 
USDOC FOR 4212/MAC/EUR/OEURA 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV ELAB FR
SUBJECT:  MILD FRENCH GDP GROWTH IN FIRST HALF OF 2007 
 
REF:  06 Paris 7815 
 
¶1. SUMMARY.  In its March overview of the French economy, the 
National Statistical Agency INSEE forecast GDP growth to stay on an 
annual pace close to 2.0 percent in the first half of 2007. 
Economic growth is forecast to remain dependent on household 
consumption.  Presidential elections are not expected to have any 
near-term impact on French economic growth.  END OF SUMMARY 
 
¶2.  INSEE maintained its 2007 French GDP growth forecast (reftel) 
for Q-1 at 2.0 percent (annualized), but revised upward its Q-2 
estimate to 2.4 percent GDP growth from 2.0 percent. INSEE forecast 
household consumption growth would accelerate to 3.6 percent in Q-2, 
from 2.8 percent in Q-1 after a mild winter.  Oil prices at 55 USD 
per barrel would help inflation to remain very moderate (1.0 percent 
in February after 1.2 percent in January).  INSEE forecast corporate 
investment will increase on the same moderate 3.0 percent pace 
compared with 2006.  The trade deficit would shave 0.2 percent from 
GDP growth as export growth would remain lower than import growth. 
 
 
¶4.  INSEE reiterated its forecast of a decrease in the unemployment 
rate to 8.2 percent by the end of June, although it said the 
statistics may be changed after an annual employment survey. 
 
¶5.  INSEE Chief Economist, Eric Dubois, said "we are expecting 
economic growth to remain on annual pace close to 2.0 percent in the 
first half of 2007, which can be qualified as mild (NOT sluggish)." 
He insisted that economic growth was "leveling off."  An analyst 
close to businesses and the financial community, who was surprised 
by this insistence, remarked to emboff that companies including 
medium-sized companies are profitable and intend to maintain hiring. 
To reach 2.25 percent, the mid-point of the government forecast, 
Dubois said "GDP has to increase 2.8 percent (annualized) in each of 
the last two quarters." 
 
¶6.  Risks in the INSEE forecast are mixed.  On the one hand, there 
are still uncertainties about the U.S. real estate market landing. 
Turbulence in the financial markets could increase risk aversion and 
affect the world economy.  On the other hand, economic growth in the 
euro zone could be underestimated and benefit France.  INSEE did not 
provide an estimate of the impact of these risks on GDP growth. 
 
¶7.  The INSEE forecast is the last one before presidential elections 
on April 22 and May 6.  Dubois said the campaign is not having any 
"perceptible real impact" on the French economy.  The next INSEE 
forecast will be published in June. 
 
Stapleton#