The French economy experienced a faster growth rate than anticipated in the second quarter, according to official data released on Tuesday. This positive development provided a boost to the eurozone.
In the face of increasing deficits and a growing debt burden, the French government has been relying on stronger economic growth to facilitate the task of balancing the budget.
France, the second largest economy in the eurozone after Germany, saw a 0.3 percent expansion in the second quarter, surpassing the earlier estimate of 0.1 percent by the INSEE statistics institute.
Finance Minister Bruno Le Maire praised the “excellent performance” of the French economy.
Growth figures for Germany and the wider eurozone are set to be released later in the day.
Spain, one of the strongest performers in the region, reported a 0.8 percent growth, driven by exports and robust household spending. This surpassed the central bank’s forecast of 0.6 percent growth.
France’s gross domestic product (GDP) was boosted by foreign trade and an uptick in corporate investment.
Exports increased by 0.6 percent, while imports remained stable.
The growth figure aligned with the Bank of France’s more positive estimate.
While domestic demand made a minor positive contribution to growth, consumer spending – a key driver of expansion in the first quarter – remained steady. However, in June alone, consumer spending decreased by 0.5 percent as households reduced consumption of food and energy.
– Domestic demand ‘disappointing’ –
Economist Maxime Darmet from Allianz Trade described the headline growth figure as “surprisingly strong”, but also noted that domestic demand has been “very weak for three consecutive quarters”, which he found “very disappointing”.
INSEE revised its first-quarter growth estimate to 0.3 percent from the previous 0.2 percent and added 0.1 points to the fourth-quarter 2023 growth figure.
France’s economic performance is on track to meet or even surpass the 1.0 percent overall growth forecasted by Le Maire for 2024, according to INSEE.
Despite the need for significant savings in order to adhere to European Union deficit and debt limits by 2027, the French government has seen increased spending in the second quarter. Investments rose by 0.6 percent and consumer goods spending by 0.3 percent.
INSEE predicted earlier this month that the ongoing Olympic Games in France would contribute 0.3 percent to economic growth in the third quarter, pushing expansion in the September quarter to an estimated 0.5 percent.
However, the Olympic boost could be dampened by political uncertainty following an inconclusive general election, as surveys suggest.
The current French government, led by Prime Minister Gabriel Attal, is currently in a caretaker role, with President Emmanuel Macron expected to appoint a new prime minister next month.
The New Popular Front (NFP), a coalition of leftist parties, emerged as the largest bloc in the National Assembly vote but lacks an absolute majority.
If appointed to lead the next government, NFP candidate Lucie Castets stated that adhering to the EU’s deficit and debt rules would not be her top priority.
A key survey showed a contraction in business confidence in France for July, dropping to its lowest level since February 2021.
The Paris stock market saw a 0.4 percent increase in morning trading following the release of the data.
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