The French economy grew at its fastest pace in five and a half years in the second quarter spurred on by a surge in business investment and strong consumer spending, official data showed on Tuesday.
The gross domestic product of the eurozone's second largest economy rose by 1.1 percent compared with the first three months of the year, according to a second estimate from national statistics office INSEE.
Growth was slightly below the 1.2 percent rise forecast by a Reuters poll of economists and follows a flash estimate issued by INSEE earlier in the month which put second quarter growth at between 1.1 and 1.2 percent.
The rise was the highest since 1.2 percent in the fourth quarter of 2000.
"The good news is we had seen a temporary setback in business spending in the previous quarter," said David Naude, senior economist at Deutsche Bank.
"There was a risk that the spike in oil prices was going to put businesses on hold and we see that this was just temporary because we see a big rebound." Business investment jumped 1.8 percent after falling 0.5 percent the previous quarter.
Consumer spending, which has been the mainstay of economic growth in recent quarters as businesses have lagged behind, slowed slightly but continued at a strong pace. It rose 0.7 percent after rising 0.9 percent in the first quarter. The strong numbers are helpful for the governing conservatives as they prepare for a presidential election next year having promised to cut unemployment.
Faster economic growth has created new jobs. Payrolls data last week showed France created jobs at the fastest pace in five years in the second quarter as construction and service sector companies hired new workers.
Some businesses have been able to reap the benefits. French telecoms and construction group Bouygues posted a 9 percent rise in first half sales, helped by a solid housing market at home and large contracts abroad.
But the pick up in investment and consumption led to a sharp rise in imports while exports slowed, in a sign that many companies are struggling to take advantage of stronger demand.
Imports climbed 3.3 percent compared with 1.2 percent in the previous quarter. Exports rose 1.8 percent in the second quarter after increasing 3.4 percent in the first quarter.
This led to an overall worsening of the trade deficit which shaved 0.5 of a percentage point off growth after contributing 0.6 of a point to growth in the first quarter.
"The structural difficulty of the French economy in responding to external and internal demand has reappeared," said Mathieu Kaiser, economist at BNP Paribas.
French companies often complain that strict rules on hiring and firing employees prevent them from reacting quickly to fluctuations in demand putting them at a disadvantage compared to their foreign rivals.
The improved growth numbers have prompted some economists to revise up their forecasts this year to within the government's range of 2.0 to 2.5 percent.