France: Economic growth decelerates in Q1
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.