RTTNews - The French economy shrank for the fourth quarter in a row on plunging global demand, official data showed Friday.

According to statistical office, INSEE, the second largest economy in the EU 16 bloc contracted 1.2% in the first quarter from the previous three months. It follows a revised 1.5% contraction in the fourth quarter and a 0.2% decline in the third quarter. The GDP decline in the first quarter was slightly smaller than the consensus forecast of 1.3%.

Following revisions to earlier data, the Paris-based statistics agency revealed that the economy had entered recession in the third quarter of 2008. Recession is defined as two straight quarters of decline in GDP.

On an annual basis, the economy contracted 3.2%, while the forecast was for a 2.5% decline.

Total Gross Fixed Capital Formation slackened again by 2.3% sequentially in the first quarter, driven by a 3.2% drop in non-financial corporations' GFCF and a 1.5% fall in the decline in households' GFCF.

Meanwhile, foreign trade fell, as both exports and imports collapsed 6% and 5.3%, respectively. Foreign trade balance did not contribute to GDP growth this quarter. Eventually, inventory changes contributed a negative 0.8 points to GDP growth, after a minus 0.7 points in the third quarter.

French Finance Minister, Christine Lagarde said the economy is now set to shrink 3% this year. This is double the 1.5% decline estimated earlier by the government.

The European Commission in its spring forecast revealed that it sees no clear signs of recovery in France in the short term. GDP growth is set to remain in negative territory throughout 2009 and sees growth remaining close to stagnation on average next year. The Brussels-based commission sharply lowered the GDP outlook for the euro area. The 16-nation euro area is now expected to contract 4% in 2009 and 0.1% next year.

In a separate communiqué, the INSEE said 138,100 jobs were destroyed in the principally market sectors in the first quarter. At the end of March, the number of payroll employees in these sectors totaled 15.75 million.

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