France: Second reading confirms robust GDP growth in Q3
A second reading of national accounts data confirmed that GDP grew 3.0% on a seasonally-adjusted quarter-on-quarter basis in the third quarter, up from 1.3% in the second quarter and marking the sharpest increase since Q3 2020. Meanwhile, on an annual basis, economic growth moderated to 3.3% in Q3 from 18.8% in the previous period, largely due to a less favorable base effect.
The upturn in quarterly terms was largely attributed to an improvement in household consumption. Consumer spending growth accelerated to 5.0% in seasonally-adjusted quarter-on-quarter terms in the third quarter, which marked the best reading in a year (Q2: +1.4% s.a. qoq). Moreover, government consumption expanded a robust 2.9% in Q3 (Q2: +0.7% s.a. qoq). However, fixed investment growth cooled to 0.1% in Q3, marking the worst result since Q2 2020 (Q2: +2.4% s.a. qoq).
Meanwhile, conditions on the external front improved, with exports of goods and services rising 2.5% on a seasonally-adjusted quarter-on-quarter basis in the third quarter, which marked the best reading since Q4 2020 (Q2: +1.2% s.a. qoq). Conversely, growth in imports of goods and services moderated to 0.1% in Q3 (Q2: +1.6% s.a. qoq). As a result, the external sector added 0.7 percentage points to the headline reading, contrasting Q2’s 0.2 percentage-point subtraction.
However, rising numbers of Covid-19 infections from mid-November, coupled with the emergence of the Omicron variant, are bound to weigh on growth prospects, with the government’s response likely to determine the size of the economic impact.
Charlotte de Montpellier, economist at ING, highlighted:
“Ultimately, as things stand, i.e. in a situation without new restrictions, we are already revising our growth forecast for Q4 2021 and Q1 2022 slightly downwards. With expected quarterly growth rates of 0.5% and 0.4% respectively, we are not yet in a pessimistic scenario, though stronger containment measures could further reduce expected growth. We assume that the health situation will improve in spring 2022, leading to a significant rebound in economic activity. Ultimately, the average forecast for 2022 remains for growth close to 4.0%. The risks are nevertheless skewed to the downside.”