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French economy flat in 2012 as purchasing power drops


The French economy, the eurozone's second biggest, contracted by 0.3 percent late last year and business activity was flat for 2012 as a whole as household purchasing power declined for the first time since 1984, official data showed on Wednesday.

The fourth-quarter decline in gross domestic product (GDP) followed a slight increase of 0.2 percent in the three months from July through September, the national statistics institute Insee said as it revised the third-quarter figure up slightly from a previous estimation of 0.1 percent.

With the French economy contracting by 0.1 percent in each of the first two quarters, the growth figure for all of 2012 was zero, below the government's expectation of a slight increase of 0.3 percent.

This year, Insee forecasts that business activity will remain flat in the first three months and edge up by just 0.1 percent in the second quarter.

Growth was hit late last year by a 0.8 percent drop in consumer purchasing power that stemmed from increases in taxes and social charges.

Social charges paid by workers jumped by 2.0 percent in the fourth quarter owing to an "increase of contribution rate and the end of exemptions on overtime," Insee noted.

For all of 2012, household purchasing power declined by 0.4 percent, compared with a rise of 0.5 percent one year earlier.

It was the first drop since 1984, Insee said.