Consumption in France

France - Consumption

GDP records sharpest contraction since Q4 2020 in the first quarter

GDP fell 0.2% on a seasonally-adjusted quarter-on-quarter basis in the first quarter, below the 0.4% expansion tallied in the fourth quarter of last year. This marked the first contraction since Q4 2020. On an annual basis, economic growth moderated to 4.5% in Q1, following the previous quarter's 4.9% expansion.

The quarterly downturn came as household spending contracted 1.5% in Q1 (Q4 2021: +0.3% s.a. qoq)—its weakest performance since Q4 2020. This is largely explained by high inflation, which eroded households’ purchasing power. Moreover, public spending growth halved, expanding 0.2% (Q4 2021: +0.4% s.a. qoq). In contrast, fixed investment rebounded, growing 0.6% in Q1, compared to a 0.3% contraction in the prior quarter.

On the external front, exports of goods and services growth fell to 1.2% in Q1, marking the worst reading since Q1 2021 (Q4 2021: +2.6% s.a. qoq). In addition, growth in imports of goods and services moderated to 0.5% in Q1 (Q4 2021: +3.9% s.a. qoq). Nonetheless, the external sector contributed 0.2 percentage points to the overall growth reading in Q1, contrasting with a 0.4 percentage point subtraction in the previous quarter.

Commenting on the release, Charlotte de Montpellier, economist at ING, remarked:

“The second quarter has thus started very badly for the consumption of goods. While the consumption of services is probably much more dynamic, it is likely that household consumption will again contribute negatively to growth in the second quarter, given the inflationary context and the decline in confidence. Consequently, a further contraction of GDP in the second quarter is expected. It means that, in our view, the French economy is currently in a de facto recession. […] For the second half of the year, we expect a slight recovery. The third quarter should see a significant increase in tourism activity against the backdrop of the end of health restrictions and the return of foreign tourists, which should help to achieve quarterly growth of around 0.4%.”

FocusEconomics Consensus Forecast panelists see the economy expanding 3.8% in 2022, which down 0.1 percentage points from last month’s forecast, and 2.2% in 2023.