French growth forecast cut while Germany's is raised

PSA Peugeot Citroen production line
Image caption The Bank of France said the automotive sector had declined in May

There has been mixed news on the outlook for the eurozone's biggest economies.

The Bank of France expects the French economy to contract by 0.1% between April and June this year, having predicted that there would be zero growth less than a month ago.

But the German central bank has increased its forecast for German growth this year from 0.6% to 1%.

German growth has kept the eurozone out of recession this year.

There was zero growth in the French economy in the first three months of the year, following growth of just 0.1% in the previous quarter.

Earlier this week, the latest set of official figures confirmed that the eurozone economy as a whole achieved zero growth in the first three months of 2012.

Also on Friday, Spain again had to deny that it was about to ask for bailout funds to support its banking system.

The Reuters news agency quoted unnamed EU and German sources saying that the request would be made on Saturday.

But the Spanish government has maintained that it is waiting for reports from the International Monetary Fund and two private consultancies saying how much extra money the banking system needs.

In addition, reports of a meeting of the Eurogroup of finance ministers to discuss the issue have not been confirmed.

Declining activity

The cut in the French growth forecast came in the Bank of France's Survey on Industry and Services for May.

It found that: "Industrial activity declined in May, in particular in the automotive and metalworking sectors."

In the services sector: "activity marked an overall decline, especially in the temporary work, transport and hotel-catering sectors".

On Thursday, official figures showed that French unemployment had hit 10% in the first quarter of 2012.

Weak demand

While there was better news from Germany for the current year, the Bundesbank also cut its 2013 forecast from 1.8% to 1.6%.

Latest figures from Germany showed that its exports had dropped 1.7% in April compared with the previous month.

The decline followed three consecutive months of gains.

But exports grew 3.4% compared with the same month last year, led by a 10.3% increase in exports to countries outside the European Union.

Germany's imports fell 4.8% compared with the previous month.

"The recent escalation of the debt crisis is leaving its mark. Orders are also declining because of weaker global demand," said Juergen Michels from Citigroup.

"Exports are likely to fall further in the months ahead because of this, but we won't see a complete collapse."

Greece pain

There was more grim news from Greece, with latest growth figures showing that in the first three months of the year the country's economy contracted by 6.5% compared with the same period a year earlier.

The economy is struggling with the impact of tough austerity measures that have included spending cuts and tax rises, and with an unemployment rate that is now above 20%.

Consumer spending in the quarter fell by 7.5% from the year before, while gross capital investment sank 21.3%.

Greece is going to the polls on 17 June, in an election that is seen as key to whether the country remains in the eurozone.

Italy production

Figures from Italy on Friday, showed that industrial production in the country declined by more than expected in April.

Data agency Istat said that production had fallen 1.9% compared with the previous month.

Compared with the same month last year, industrial production was down 9.2%, which was its worst annualised drop since November 2009.

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