The French economy unexpectedly shrank in the third quarter as President
Francois Hollande failed to revive corporate investment in the face of one of the worlds heaviest tax burdens.
Gross domestic product fell 0.1 percent in the three months through September, national statistics office Insee said in an e-mailed statement. Economists forecast no growth, according to the median of 24 estimates in a Bloomberg News survey.
The figures, which follow Frances exit from recession in the second quarter, underline the issues Hollande is confronting as he tries to revive Europes second-largest economy and reverse an increase in
unemployment thats at a 14-year high. Facing taxes equivalent to 46 percent of GDP, companies such as Cie de Saint Gobain SA are cutting investment spending or holding off raising it.
The French economy may have touched bottom but companies are still hesitating, said
Michel Martinez, an economist at Societe Generale in Paris. There remains huge uncertainty around economic policy and profit margins are among the weakest in Europe. The upshot is that we have a recovery but a tepid one.
Investment spending by non-financial companies fell 0.6 percent in the quarter, while consumer spending rose 0.2 percent.