By Sudip Kar-Gupta
PARIS (Reuters) - French unemployment rose slightly in the first three months of the year, confounding economists' expectations for a decline and suggesting President Emmanuel Macron's policies to boost jobs and growth are struggling to find traction.
Data from the national statistics office INSEE showed the ILO jobless rate rose to 9.2 percent in the first quarter, up from 9.0 percent in the last quarter of 2017. Economists polled by Reuters had forecast a rate of 8.8 percent.
While disappointing for a government that has banked on bringing high unemployment down via faster growth and tweaks to employment law, analysts suggest France may now be hampered by a wider loss of momentum across the euro zone.
"The first quarter data showed a slowdown in France but actually the country's loss of inertia wasn't a one-off, it was across Europe generally," said Lorne Baring, chief investment officer at B Capital SA.
"The question now is whether the second quarter brings France, and Europe as well, back towards the improving trend or if it confirms a slowdown is under way."
At the end of last year, in the months after Macron's election victory, France looked to be in a strong position, with growth picking up and business and consumer confidence at or near highs.
But first quarter growth of 0.3 percent came in below expectations and manufacturing surveys and other indicators have since pointed to a slowdown in momentum.
"DISRUPTIVE FACTORS"
A survey of French purchasing managers on Wednesday showed business activity slowed more than expected in May, although the month was affected by a high number of holidays.
IHS Markit said its composite PMI, which covers the services and manufacturing sectors, fell to 54.5 points from 56.9 in April, hitting its lowest level since January 2017.
"There have been short-term disruptive factors," said IHS Markit chief economist Chris Williamson, adding that companies remained upbeat about prospects for now. "So we remain positive about the outlook."
Part of the problem for the euro zone is a raft of political uncertainty, both at home and abroad.
While Germany continues to grow, weaker global trade and the looming prospect of a tariff battle with the United States have hit output. The rate of growth halved in the first quarter of the year.
Italy, the euro zone's third largest economy, has still not appointed a prime minister since elections in March, and the candidate proposed by the populist coalition seeking to take office is an entirely unknown quantity.
Yields on Italian debt have climbed -- reflecting the higher risk of holding Italian assets -- on the back of the political instability and the euroscepticism of both the anti-establishment 5-Star Movement and the far-right League.
For a graphic: http://reut.rs/2A41e7P
For more details from INSEE: http://www.insee.fr/en/themes/indicateur.asp?id=14