French Trade Deficit Expands to Record on Oil Costs

By Helene Fouquet

Aug. 7 (Bloomberg) -- France's tradedeficit expanded to a record in June as increased oil prices pushed imports to an all- time high while the euro's gains and a cooling global economy weighed on exports.

The deficit increased to 5.6 billion euros ($8.7 billion) from a revised 4.7 billion euros in May, the Trade Ministry in Paris said today. The June figure was higher than the 4.6 billion-euro median estimate of seven economists in a Bloomberg News survey.

The euro's 12 percent advance against the dollar in the past year has made French goods less competitive abroad, while a 65 percent jump in oil prices in that time boosted the cost of imported energy. Overall imports rose 2.8 percent in June to 40.5 billion euros, with 1 billion euros of that due to higher crude oil, the ministry said.

``France is suffering directly from the very high oil prices in June, which it did not prepare itself for,'' Caroline Newhouse-Cohen, an economist at BNP Paribas SA in Paris, said in an interview with Bloomberg Television today. ``These results show the weaknesses of French trade, especially looking at Germany's performance.''

Germany had a record trade surplus in June as exports defied the euro's advance and jumped 4.2 percent, more than economists expected, data released today showed. Demand from emerging markets like China and Russia has helped German exporters cope with the global slowdown and stronger currency.

`Macroeconomic Evolutions'

``Trade figures only reflect global macroeconomic evolutions,'' French Trade Minister Anne-Marie Idrac told Les Echos in an interview published today.

Global economic expansion is slowing after the U.S. subprime mortgage market collapsed last year, making banks reluctant to lend and driving up the cost of credit. The International Monetary Fund last month forecast world growth would slow to 4.1 percent this year from 4.9 percent in 2007.

French exports increased 0.6 percent to 34.9 billion euros in June, with shipments to the U.S. and the Middle East declining, the ministry in Paris said today. French business confidence fell to the lowest in more than three years last month as surging inflation and the stronger euro further dimmed the economic-growth outlook.

Tom Enders, chief executive officer of Airbus SAS, the world's biggest planemaker, last month called the euro's appreciation against the dollar a ``deep, substantial problem.''

Airbus Orders

Airbus sold 27 aircraft in June for 1.35 billion euros, up from 20 planes in May for 831 million euros, according to today's report. Louis Gallois, chief executive officer of Airbus's Paris- and Munich-based parent, on July 30 stuck to a target of 850 Airbus orders this year and 470 deliveries as the company outpaces Boeing Co. in both categories.

Expansion in the French economy slowed to 0.2 percent in the second quarter, the least in almost two years and less than half the pace in the first three months of the year, Paris-based statistics office Insee estimates. The economy will stagnate in the third quarter and grow 0.2 percent in the final three months of 2008, Insee projects.

French Finance Minister Christine Lagarde last month said expansion in 2008 would be at the lower end of the government's forecast of between 1.7 percent and 2 percent, down from 2.2 percent in 2007.

To contact the reporters on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net.