RTTNews - France's economy is set to stabilize in the fourth quarter of this year, after contracting at a slower pace in the second and third quarters, the statistical office INSEE said Friday. GDP for the year is expected to decline after showing growth last year. At the same time, consumer prices are forecast to rise in the fourth quarter after declining in the preceding two quarters.

The statistical office expects the French economy to stabilize in the fourth quarter after contracting 0.6% in the second quarter and 0.2% in the third quarter of the year. In the first quarter, the economy shrank 1.2%. The economy is forecast to contract 3% for the whole of the year after showing 0.3% growth in the previous year.

Consumer prices are expected to grow in the fourth quarter following declines in the previous two quarters. After falling 0.4% and 0.5% respectively in the second and third quarters, consumer prices are expected to rise 0.6% in the fourth quarter. However, consumer prices for the year are expected to be flat after rising 2.8% last year.

Core inflation is expected be 1.5% in the second quarter, rising to 1.7% in the third quarter and then easing back slightly to 1.6% in the fourth quarter. For the entire year, the core inflation is expected to be 1.6%.

The drop in manufacturing activity is forecast to gradually slow down and stabilize in the fourth quarter, as the business climate starts improving. Activity is forecast to fall by a new high of 15.7% in 2009, after declining 1.8% last year.

Investments by firms is to contract sharply by 3.2% and 2.7%, respectively in the first two quarters, but the pace of decline will slacken in the second half of the year. In the third and fourth quarters, investments were likely to fall 2.3% and 1.3% respectively due to an improvement in financing conditions and less negative business prospects.

In line with falling world demand for French products, exports are expected to fall by 3.8% in the second quarter. In the third quarter, the exports are forecast to decline 1.8% and then drop 0.8% over the next three months. For the year, exports are expected to slip 13.5%.

Similarly, the pace of contraction in imports will slow further into the fourth quarter. After declining 2.9% in the second quarter and by 1.2% in the third quarter, imports are expected to drop 0.3% in the fourth quarter. In 2008, imports are forecast to shrink 10.1%, after rising 0.6% in the previous year.

Household purchasing power is expected to go negative in the fourth quarter, by 0.2%, after remaining flat in the third quarter. For the second quarter, the purchasing power is forecast to rise 0.7% and for the full year, it is expected to rise by 1.1% compared to 0.6% last year.

Meanwhile, the labor market is set to worsen, with jobless rate rising further to hit 10.1% in Metropolitan France in the fourth quarter. However, the jobless rate for the year was to come in lower by 9.4%.

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