France: Economy beats expectations and exits technical recession

GDP rose 0.5% in the second quarter over the previous three-month period, according to a preliminary estimate released on 12 August. The increase followed the 0.2% drop seen in Q1, and exceeded market expectations of a milder 0.2% expansion. As a result, the economy has now escaped the technical recession it had entered into after two consecutive quarters of decline in GDP.

The second quarter reading reflected improvement in both the domestic and the external sides of the economy. Private consumption rose 0.4% over the previous period (Q1 2013: -0.1% quarter-on-quarter), and government consumption expanded 0.5% (Q1 2013: +0.3% qoq). Meanwhile, gross fixed investment contracted 0.5%, which followed the sharper 1.0% decline seen in Q1. On the other hand, changes in inventories added 0.3 percentage points to overall economic growth.

Meanwhile, the external sector's net contribution to overall growth improved from a 0.2 percentage-point detraction in the first quarter to zero contribution in the second quarter. Exports of goods and services increased 2.0% in Q2 (Q1 2013: -0.5% qoq), while imports rose 1.9% (Q1 2013: +0.1% qoq).

The government expects the economy to expand 0.1% in 2013. FocusEconomics Consensus Forecast panellists see the economy growing 0.2% this year, which is down 0.1 percentage points from last month's forecast. For 2014, panellists anticipate economic growth to inch up to 0.8%.