Good news for the French economy. France’s gross domestic product (GDP) grew by 0.3% in the second quarter, supported by foreign trade and a rebound in business investment while household consumption is down, the French government said on Tuesday, July 30. INSEE.
This first estimate of the growth of the French economy between April and June by the National Institute of Statistics is higher than its forecast of an increase of 0.1% compared to the first quarter, during which the GDP had grown by 0.3% (revised upwards by 0.1 point). The Banque de France had been more optimistic, with an anticipation of 0.3% in line with the actual level of growth.
The Minister of Economy and Finance, Bruno Le Maire, welcomed the “excellent performance” of the French economy, estimating that growth could exceed the 1% forecast set by the government in 2024.
In the spring, marked at the end of the period by the calling of early legislative elections and the beginning of a political deadlock, activity benefited from the positive contribution of foreign trade, which increased by 0.2%, detailed INSEE. Exports remained dynamic, driven in particular by the delivery of a new ship.
After being in the red for the previous two quarters, business investment returned to positive territory, with a slight increase of 0.1%. It was driven by an acceleration in investment in services, which offset the continued decline in manufactured goods.
Household consumption down over one month in June
On the other hand, household investments are still struggling (-0.5%), mainly in new housing, in a context of interest rates remaining high despite the reduction initiated in June by the European Central Bank (ECB). A traditional driver of French growth, household consumption remained stable in the third quarter: food purchases declined, while gas and electricity consumption increased due to a cool spring, as did consumption of services, in a context marked by the continued decline in inflation. In June alone, household consumption of goods fell by 0.5% compared to May, penalized by a decline in energy and food consumption.
Concerning the third quarter, INSEE had said at the beginning of July that it expected a sharper rebound in economic growth thanks to reinvigorated household consumption and a positive effect of the Olympic and Paralympic Games, held in Paris from July 26 to August 11, then from August 28 to September 8. This “Olympic Games effect” is estimated at 0.3 points on growth, which would reach 0.5% in total. The statistical institute also revised upwards by 0.1 points the growth of GDP in the fourth quarter of 2023, which now reaches 0.4% compared to the previous three months.