GDP in France

France - GDP (billions of Euros)

GDP growth overshoots market expectations in Q3

According to a preliminary estimate, GDP grew a robust 3.0% on a seasonally-adjusted quarter-on-quarter basis in the third quarter, overshooting market analysts’ expectations of a 2.1% expansion (Q2: +1.3% s.a. qoq). On an annual basis, GDP grew a softer 3.3%, chiefly due to a less favorable base effect (Q2: +18.8% yoy).

The third quarter’s upturn was largely attributed to an improvement in consumer spending, as the easing of Covid-19 restrictions released pent-up demand. Household consumption grew 5.0% in seasonally-adjusted quarter-on-quarter terns, expanding at the sharpest rate in a year and accelerating from the 1.3% increase tallied in the prior quarter. Similarly, public spending picked up pace as the government continued to deploy its fiscal tools to mitigate the economic impact of the pandemic (Q3: 3.0% s.a. qoq; Q2: 0.7 s.a. qoq). That said, capital spending slid 0.1% in Q3 (Q2: +2.5% s.a. qoq), logging the worst reading since Q2 2020, as global supply disruptions likely hindered investment.

Moreover, conditions on the external front improved, as the relaxation of restrictions domestically and abroad spurred tourism activity and buoyed foreign demand. Exports of goods and services increased 2.3% in the quarter, accelerating from Q2's 1.2% rise. Meanwhile, imports of goods and services lost notable steam, rising a marginal 0.1% in Q3 (Q2: +1.7% s.a. qoq). As a result, the external sector added 0.6 percentage points to the headline reading, contrasting Q2’s 0.2 percentage-point subtraction.

Commenting on the outlook, Charlotte de Montpellier, economist at ING, said:

“The Q3 growth rate is more than likely the highest we will see in France in 2021 and 2022. The peak has passed and now economic growth will start to slow down. […] We expect quarterly growth of less than 1% from the fourth quarter of 2021 and for all quarters of 2022. After the 8% fall in GDP in 2020 and the increase to over 6.6% in 2021 (we expect 6.8%), GDP growth would be around 4% for the whole of 2022.”

FocusEconomics Consensus Forecast panelists see the economy expanding 3.9% in 2022, which is down 0.1 percentage points from last month’s forecast, and 2.2% in 2023.