France: Economy rebounds softly in Q3
November 29, 2016
According to the second estimate released by the Statistical Office (INSEE) on 29 November, the French economy expanded a soft 0.2% in the third quarter in seasonally-adjusted terms, matching the preliminary estimate released by the INSEE in October. Q3’s print marks a rebound from Q2’s unexpected 0.1% contraction and suggests that the economy is struggling to gain traction. Year-on-year, GDP growth slowed from 1.2% in Q2 (previously reported: +1.3% year-on-year) to 1.1% in Q3, the slowest rate in almost two years. The third quarter print mainly reflects a feeble acceleration in fixed investment, which more than offset a stagnation in private consumption and a negative contribution of the external sector to growth.
Domestic demand in Q3 failed to improve on its weak performance in the second quarter. Overall, the contribution of domestic demand to economic growth remained unchanged at the 0.1% reading observed in Q2. Looking at the components, growth in private consumption was flat in the third quarter (Q2: 0.0% quarter-on-quarter). The quarterly reading reflects a sharp contraction in spending on household equipment and energy consumption owing to unseasonably low temperatures. Fixed investment edged up from a flat reading in Q2 to a revised 0.2% increase in Q3 (previously reported: +0.3% quarter-on-quarter) thanks to solid investment by the government and households. Meanwhile, growth in government consumption edged down from 0.4% in Q2 to a revised 0.3% in Q3 (previously reported: +0.4% qoq).
The external sector recorded a negative contribution to GDP as growth in imports outpaced exports. Overseas demand for French goods swung from a 0.1% drop in Q2 to a 0.5% expansion in Q3 (previously reported: +0.6% qoq). Imports rebounded from a 1.7% drop in the second quarter to a strong 2.5% expansion in the third quarter (previously reported: +2.2% qoq), the sharpest expansion in over five years. The surge in imports was driven by strong demand for raw hydrocarbons and transport equipment. Overall, the external sector’s net contribution to economic growth deteriorated from plus 0.5 percentage points in Q2 to minus 0.6 percentage points in Q3, logging the worst contribution to growth in almost seven years.