France: Second estimate confirms stable growth in Q2
July 30, 2018
A detailed breakdown of economic growth released on 29 August by the Statistical Institute (INSEE) confirmed the preliminary estimate that showed the French economy expanded at a steady pace in the second quarter. GDP rose 0.2% on a seasonally-adjusted quarter-on-quarter basis, unchanged from the first quarter’s reading. In annual terms, growth in the second quarter slowed to 1.7% from 2.2% observed in the first quarter.
Subdued growth in the second quarter largely reflected weak domestic demand. Private consumption faltered in Q2 and was down 0.1% in quarter-on-quarter terms (Q1: +0.2% quarter-on-quarter s.a.). The slump came on the back of weaker demand for food products; lower energy expenditures due to weather factors; and a marked downturn in transport expenses amid public transport strikes, particularly by rail workers. On the flip side, fixed investment growth accelerated notably to 0.8% in Q2 (previously reported: 0.7% qoq s.a.) from 0.2% in Q1 (previously reported: 0.7% qoq s.a.), thanks to solid business investment growth more than offsetting a marginal fall in household investment. Lastly, government consumption accelerated marginally in Q2, expanding 0.3% (previously reported: 0.4% qoq s.a) in the quarter, above Q1’s 0.1% (previously reported: +0.2% qoq s.a.) increase.
Meanwhile, the external sector took a bite out of growth in Q2, as imports rebounded sharply, swinging from a 0.4% contraction in Q1 (previously reported: -0.3% qoq s.a.) to a 1.0% expansion in Q2 (previously reported: +1.7% qoq s.a.). The recovery of imports outpaced that of exports: Exports swung from a 0.4% dip in Q1 to a 0.2% increase in Q2 (previously reported: 0.6% qoq s.a.). As a result, the external sector subtracted 0.3 percentage points from overall growth in the second quarter (Q1 net contribution: 0.0 percentage points).
Growth should pick up in the second half of the year as fixed investment continues expanding at a robust pace and household spending benefits from rising employment, which is also likely to get a boost from recent income tax cuts. However, uncertainty over global trade policies continues to weigh on the outlook.
Author: Almanas Stanapedis, Economist