France: Economic growth decelerates in Q1
April 27, 2018
The French economy started 2018 on a weak note, according to the first estimate for GDP growth in the first quarter, released by the National Statistical Institute (INSEE) on 27 April. GDP expanded 0.3% on a seasonally-adjusted quarter-on-quarter basis, coming in below the 0.7% increase observed in the fourth quarter of 2017 and slightly below the 0.4% increase expected by markets. In annual terms, economic growth in the first quarter slowed from a 2.6% expansion in the fourth quarter to a 2.1% increase in the first quarter.
Q1’s print reflected a slowdown in the domestic economy and a weak performance by the external sector. Growth in private consumption was sluggish, coming in at 0.2% in quarter-on-quarter terms (Q4: +0.2% quarter-on-quarter) despite above-average consumer confidence and low unemployment. Fixed investment recorded a steep deceleration and rose a soft 0.6% (Q4: +1.1% qoq). Growth in this subcomponent was dragged down by a notable slowdown in corporate investment, particularly in the manufacturing sector. Meanwhile, government consumption edged down from a 0.4% increase in the fourth quarter to a 0.3% expansion in the first quarter. As a result, the contribution of domestic demand excluding inventory changes dropped from 0.5 percentage points in Q4 to 0.3 percentage points in Q1.
The external sector had a disappointing performance in the first quarter and made no contribution to growth, contrasting the 0.6 percentage-point contribution made in the fourth quarter of 2017. Growth in exports swung from a strong 2.5% expansion in Q4 to a 0.1% contraction in Q1, dragged down by a decline in exports of transport equipment. Lastly, growth in imports slowed from a 0.4% increase in the fourth quarter to a flat reading in the first quarter. The deceleration in imports was partly led by weak private consumption and a decline in imports of intermediate goods that reflected muted industrial activity in the first quarter of the year.
France GDP Forecast
FocusEconomics Consensus Forecast panelists expect the economy to grow 2.0% in 2018, which is up 0.1 percentage points from last month's forecast. For 2019, panelists forecast 2.0% growth.