France: Economy expands in Q2 amid gradual reopening
July 30, 2021
According to a preliminary estimate, GDP expanded 0.9% on a seasonally-adjusted quarter-on-quarter basis in the second quarter, slightly above market analysts’ expectations of a 0.8% rise, following Q1’s flat reading. On an annual basis, economic activity picked up pace, growing 18.7% in Q1, which was up from the previous quarter’s 1.7% increase; however, this was chiefly driven by a low base effect.
The second quarter’s upturn chiefly came on the back of an improvement in domestic activity amid the gradual reopening of society. Household spending increased 0.9% on a seasonally-adjusted quarterly basis in Q2, which was above the previous quarter's 0.2% expansion, and public spending bounced back, growing 0.6% in Q2 (Q1: -0.4% s.a. qoq). Moreover, fixed investment growth gained steam in the period, accelerating to 1.1% from 0.4% in Q1.
On the external front, exports of goods and services increased 1.5% in the quarter, largely owing to stronger foreign demand, contrasting Q1's 0.5% contraction. In addition, growth in imports of goods and services picked up to 1.9% in Q2 (Q1: +1.1% s.a. qoq).
Economic activity is set to continue growing in H2, supported by sturdier domestic demand amid the easing of restrictions and incoming EU recovery funds. Upbeat foreign demand and a rekindled tourism industry should boost the external sector. Strained public finances and new virus strains represent downside risks, however.
Author: Hanna Andersson, Economist