France Domestic Demand (ann. var. %)

Domestic Demand in France

Economy records quickest expansion since Q2 2022 in the first quarter

According to a preliminary reading, GDP expanded by 0.2% on a seasonally adjusted quarter-on-quarter basis in the first quarter, above the zero growth seen in the fourth quarter of last year. Q1’s reading marked the best result since Q2 2022.

Household spending was flat in the first quarter, which was an improvement from the fourth quarter’s 1.0% contraction. Public consumption, meanwhile, dropped at the sharpest pace since Q4 2021, contracting 0.1% (Q4 2022: +0.5% s.a. qoq). Finally, fixed investment contracted 0.2% in Q1, marking the worst result since Q4 2021 (Q4 2022: 0.0% s.a. qoq).

On the external front, exports of goods and services increased 1.1% on a seasonally adjusted quarterly basis in the first quarter, which was above the fourth quarter’s 0.9% expansion. Conversely, imports of goods and services contracted 0.6% in Q1 (Q4 2022: +0.1% s.a. qoq). Consequently, the external sector contributed to the overall GDP expansion.

On an annual basis, economic growth sped up to 0.8% in Q1 from the previous period’s 0.4% increase.

On the outlook, Charlotte de Montpellier, senior economist at ING, highlighted that:

“The outlook for the rest of the year remains bleak. All in all, the growth of the French GDP in the first quarter comes almost exclusively from supply chain normalisation, which allowed a strong growth of exports. On the other hand, domestic demand is in decline. This does not bode well for the coming quarters.”