March 21 - Recession looms for France after business activity shrank in March at the fastest pace in four years, defying expectations of improvement. Edward Baran looks at the problems facing the euro zone's second largest economy.
The economic picture in France has been gloomy for a while. And the latest figures are unlikely to offer any joie de vivre. Markit's latest survey showed activity in the manufacturing and services sectors in France was the worst for four years. Anything below 50 represents a contraction .... The data also puts France at a lower spot than Spain and Italy and almost down to the level of Greece. Rob Dobson is from Markit. SOUNDBITE: Rob Dobson, Market Economist, Markit, (English), saying: "What we're seeing is a downturn in both manufacturing and services and a real dearth of demand for French manufactured goods and the services they provide. All in all not a very good picture." The service sector is the biggest worry - it generates more than half the country's economic activity. The euro zone's second largest economy could now contract by as much as 0.7 per cent this quarter That would put France in its third recession since the start of the financial crisis. Daiwa's senior economist Tobias Blattner. SOUNDBITE: Tobias Blattner, Director of European Economic Research, Daiwa, (English) saying: "A recession is very much the most likely outcome we are expecting now for the French economy. But I think when we look at the breakdown of the PMIs we can also see that this time it's more actually the services sector and that mostly suggests that it's very weak domestic demand and that was usually the cornerstone of French growth in the past couple of years." French consumers are in no place to pick up the slack Unemployment remains above 10 per cent, which is weighing on consumer spending. And the figures for the wider euro zone offer no relief. The economic downturn deepened this month - and that was before the bailout debacle in Cyprus.