Consumption in France

France - Consumption

Second estimate shows sustained momentum in Q2, bucking broader Eurozone slowdown

According to a comprehensive estimate released by the French Statistical Institute (INSEE) on 29 August, GDP increased a seasonally-adjusted 0.3% in Q2 from the previous quarter, up from the preliminary estimate of 0.2% growth and matching Q1’s reading. On top of that, growth on an annual basis ticked up from the previous quarter (Q2: +1.3% year-on-year; Q1: +1.2% yoy).

A solid performance by the domestic economy was chiefly behind the healthy second-quarter outturn. Particularly, fixed investment led the charge (Q2: +0.9% quarter-on-quarter seasonally-adjusted; Q1: +0.5% qoq s.a.), propelled by private sector investment activity. Household consumption, however, lost some traction in the quarter (Q2: +0.2% qoq s.a.; Q1: +0.3% qoq s.a.), weighed on by falling disposable income amid higher inflation. This suggests that the government’s fiscal stimulus measures stopped short of boosting spending despite shoring up consumer confidence levels in Q2. For its part, government spending growth jumped in the quarter (Q2: +0.4% qoq s.a.; Q1: +0.0% qoq s.a.).

On the external front, French export growth stalled in the second sector (Q2: +0.0% qoq s.a.; Q1: +0.1% qoq s.a.) in tandem with faltering trade within the Eurozone and amid sustained global trade war uncertainty. That said, thanks to imports swinging to contraction (Q2: -0.2% qoq s.a.; Q1: +1.1% qoq s.a.), the external sector added 0.1 percentage points to overall growth in the second quarter, after subtracting 0.3 percentage points in the first quarter.

FocusEconomics analysts see growth at 1.3% in 2019, which is unchanged from last month’s forecast, and also at 1.3% in 2020.