France: GDP grows at softest pace since Q1 2021 in the fourth quarter
According to a preliminary reading, GDP growth lost momentum, coming in at 0.7% on a seasonally-adjusted quarter-on-quarter basis in the fourth quarter, down from 3.2% in the third quarter. Meanwhile, on an annual basis, economic growth accelerated to 5.4% in Q4, compared to Q3’s 3.5% increase. Overall, GDP expanded a solid 7.0% in 2021, contrasting 2020’s 8.0% pandemic-induced plunge.
Q4’s quarterly downturn was mainly attributed to moderating domestic activity, largely weighed on by tighter Covid-19 curbs amid the spread of the Omicron variant. More specifically, private consumption growth fell to 0.5% in Q4, marking the weakest expansion since Q1 2021 (Q3: +5.6% s.a. qoq). Furthermore, government spending growth slowed to 0.3% (Q3: +2.7% s.a. qoq). On the other hand, fixed investment growth sped up to 0.5% in Q4, from the 0.1% expansion logged in the prior quarter.
On the external front, exports of goods and services growth improved to 3.2% in seasonally-adjusted quarter-on-quarter terms in Q4, which marked the best reading since Q4 2020 (Q3: +1.7% s.a. qoq). In addition, growth in imports of goods and services sped up to 3.6% in Q4 (Q3: +0.8% s.a. qoq). As a result, the external sector subtracted 0.2 percentage points from the headline reading, contrasting Q3’s 0.2 percentage-point addition.
Commenting on the outlook, Charlotte de Montpellier, economist at ING, said:
“Growth is being held back by the lack of personnel. Although, in contrast to other European countries, the Omicron wave of the coronavirus has not led to new health restrictions in France, activity and recruitment are hampered by the numerous contaminations which lead to significant absenteeism in companies. This high level of staff absenteeism and the continuing problems on production lines are leading to a growth slowdown in France in January, particularly in the services sector. […] The economic slowdown in France will therefore probably continue well into the first quarter. Positive quarterly growth, but close to 0%, is expected in Q1. The economy is then expected to grow at a faster pace and growth could reach close to 4% in 2022.”