By Michel Rose
PARIS (Reuters) - The French economy ended last year on a strong footing, picking up speed in the final quarter after a lackluster performance in the previous two quarters thanks to more buoyant consumer and investment spending which showed no sign of abating ahead of this spring's presidential election.
Economic output in the euro zone second-largest economy grew by 0.4 percent in the fourth quarter of 2016, in line with expectations and faster than the 0.2 percent increase in the previous three months, the INSEE national statistics agency said on Tuesday.
However, the end-of-year pick-up was not enough to push French growth for 2016 as a whole above the 1.2 percent registered in 2015, with 2016 GDP growth standing at 1.1 percent, INSEE said. With foreign trade acting as the main drag, it also failed to meet the government's own 1.4 percent target on which it based its budget for this year.
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French Finance Minister Michel Sapin nonetheless took heart in the data.
"Household and business confidence stand at a very high level and are auguring a very dynamic start to 2017, in terms of activity as well as job creation," he said in a statement to Reuters.
Consumer spending, the traditional engine of the 2 trillion euro economy, rebounded 0.6 percent in the fourth quarter after barely registering any growth in the previous six months, which had been marred by strikes against labor reforms and lower tourist spending following a deadly Islamist attack in Nice.
In a positive sign for the coming year, investment spending sharply picked up, with companies ramping up investment by 1.3 percent in the fourth quarter, while households' reached 0.9 percent as the property market improved.
Leading indicators such as Markit's purchasing managers index showed activity in the French private sector has started the year on a solid footing, reaching levels not seen in more than 5-1/2 years in January.
The pick-up in French growth also comes amid signs of a more robust recovery in the wider eurozone.
"The big question mark over the horizon is whether economic activity will be affected prior to the oncoming presidential elections," Diego Iscaro, economist at IHS Markit said in a note.
"It is fair to say that there are not any indications so far suggesting that consumer or firms are in a 'wait and see' mode, although this situation may change as the election gets closer," he added.
France's presidential elections pose the "greatest existential risk for Europe," Credit Suisse strategists said on Tuesday, although they added that supportive European Central Bank (ECB) policies could limit the elections' impact on the market.
Investors have pushed benchmark French government bonds yields higher on fears that far-right leader Marine Le Pen could create an upset similar to the Brexit vote or Donald Trump's election in the United States, despite the fact that no opinion poll shows her close to winning the election's runoff in May.
Conservative Francois Fillon and reformist centrist Emmanuel Macron are the other two frontrunners and opinion polls show either of them would defeat Le Pen should they be pitted against her.
For a graphic of GDP by contributions: http://link.reuters.com/pyx28s
For further details from INSEE: http://www.insee.fr/en/themes/info-rapide.asp?id=26
(Reporting by Michel Rose; Editing by Sudip Kar-Gupta)