France Economic Outlook
A second estimate confirmed that the economy grew 0.5% on a seasonally adjusted quarter-on-quarter basis in Q2, following Q1’s flat reading. The improvement was driven by rebounds in public spending and exports, the latter thanks to rising electricity and car foreign sales. Our panelists see growth grinding to a halt in Q3. Economic sentiment weakened in July–August, weighed on by increasing pessimism in the industrial and services sectors. Additionally, growth in both merchandise exports and tourist arrivals softened in July relative to their respective Q2 averages. In other news, in mid-September, French company Verkor raised EUR 2.2 billion to build an EV battery plant, which is set to start production in 2025. This bodes well for both the French economy and European supply chains, as it will reduce the region’s dependence on Chinese and American batteries.
Harmonized inflation rose to 5.7% in August from 5.1% in July. The acceleration was driven by stronger price pressures for food and transportation. Inflation is set to decline in the coming quarters as the effect of higher interest rates filters through the economy. The strength of the euro, monetary policy and commodity price swings are key factors to monitor.