French economic growth unexpectedly picked up to 0.3 percent in the final three months of last year, welcome news and a rare positive shock for some particularly gloomy forecasters who were looking for shrinkage or no growth at all.
But the unexpected bounce may be partly for the wrong reason: government spending.
The Markit PMIs, which are generally accepted as a good gauge of the private sector economy, suggested economic deterioration throughout the quarter, leading Markit’s chief economist Chris Williamson to predict a 0.1 percent contraction.
One forecaster in the Reuters poll of 32 said French gross domestic product would shrink by 0.2 percent, and there was one going for -0.1 percent and another for no growth at all.
“The PMI continues to signal a weaker performance than the official data,” wrote Williamson in a note. “This divergence in part, but not fully, reflects ongoing strong government spending in France, which is excluded from the PMI coverage.”