Consumption in France

France - Consumption

Second GDP release confirms growth in Q2

A second reading of national accounts data revealed that the economy expanded 1.1% in the second quarter of the year, slightly above the preliminary estimate of a 0.9% increase. Moreover, the result came in above the prior quarter´s flat reading. Meanwhile, on an annual basis the economy expanded 18.7%, accelerating markedly from the 1.5% growth tallied in the previous quarter, albeit flattered by a supportive base effect.

The upturn in quarterly terms was largely attributed to an improvement in domestic activity. Household spending gained traction in the quarter, growing 1.0% on a seasonally-adjusted quarter-on-quarter basis, accelerating from Q1´s flat reading. Moreover, fixed investment grew at a stronger rate, rising 2.4% (Q1: 0.4% s.a. qoq), while government consumption bounced back expanding 0.6%, contrasting the 0.4% slide tallied in the prior quarter.

On the external front, exports of goods and services rose 1.0% in seasonally-adjusted quarter-on-quarter terms, above Q1’s flat print. Meanwhile, imports of goods and services expanded at a stronger rate of 1.7% (Q1: +1.2% s.a. qoq). As a result, foreign trade continued to drag on the overall reading with the external sector deducting 0.2 percentage points from the headline reading, softening from Q1’s 0.4 percentage points detraction.

GDP is seen rebounding this year on firming domestic demand, with further support from the EU’s recovery spending and the ECB’s loose monetary stance. Moreover, recovering foreign demand should buoy the external sector. However, pandemic-related uncertainty amid the spread of the Delta variant, and strained public finances pose key downside risks.

FocusEconomics Consensus Forecast panelists see the economy expanding 5.7% in 2021, which up 0.1 percentage points from last month’s forecast, and 4.1% in 2022.