France Economic Forecast

GDP growth accelerated to 0.5% on a seasonally adjusted quarter-on-quarter basis in Q2, marking the best result since Q3 2021 and coming in well above market expectations. Recoveries in exports and investment underpinned the reading, more than offsetting a fall in private consumption. Exports likely got a boost from rising electricity and car exports, but they were flattered by the delivery of a cruise ship. Meanwhile, sticky inflation, subdued consumer confidence and social unrest likely weighed on private spending. Turning to Q3, the economy is set to slow on a likely pullback in exports following Q2’s bumper expansion. Available data is fairly downbeat, with the composite PMI—an indicator that measures operating conditions in the manufacturing and services sectors—at the joint-lowest level in nearly three years in July–August.

Harmonized inflation came in at 5.1% in July, down from June’s 5.3% and marking the lowest inflation rate since February 2022. The result was driven by moderating price pressures for food and non-alcoholic beverages, housing and utilities and recreation. Inflation is set to ease further by the end of the year on higher interest rates and a more challenging base effect.