France: Economic growth decelerates in Q1
The French economy started 2018 on a weaker note than initially thought, according to the third estimate for GDP growth in the first quarter released by the National Statistical Institute (INSEE) on 22 June. GDP grew 0.2% on a seasonally-adjusted quarter-on-quarter basis, coming in below the 0.7% increase observed in the fourth quarter of 2017 and matching the print reported in the second estimate of GDP released on 30 May. Q1’s print marked the first quarter-on-quarter expansion below 0.5% since Q3 2016.
Q1’s print reflected a slowdown in the domestic economy. Growth in private consumption was disappointing, coming in at 0.1% in quarter-on-quarter terms (Q4: +0.2% quarter-on-quarter) due to a decline in purchasing power. The slowdown came despite above-average consumer confidence and declining unemployment. Fixed investment decelerated from the 0.9% increase recorded in Q4 to a seven-quarter low of 0.2%. Growth in investment was weighed down by a notable slowdown in corporate investment, particularly in the manufacturing sector. Meanwhile, government consumption expanded 0.3% in the first quarter, unchanged from the fourth quarter’s print. Due to disappointing private consumption and fixed investment, the contribution of domestic demand to economic growth excluding inventory changes dropped from 0.4 percentage points in Q4 to 0.2 percentage points in Q1.
The external sector deducted a revised 0.1 percentage points from growth (previously reported: 0.0 percentage-point contribution), contrasting the 0.6 percentage-point contribution made in the fourth quarter of 2017. Dragged down by a decline in exports of transport equipment, growth in exports swung from a 2.4% expansion in Q4 to a 0.3% contraction in Q1. Finally, imports declined 0.1% in the first quarter, contrasting the 0.3% increase recorded in the fourth quarter and the 0.4% drop reported in the second GDP release for Q1. The deceleration in imports was partly led by weak private consumption and a decline in imports of intermediate goods that reflected muted industrial activity.