French Q2 GDP Growth Weaker than Expected

The French economy grew by 0.2 percent on quarter in the three months to June 2018, the same pace as in the previous period and slightly below market consensus of a 0.3 percent advance, a flash estimate showed. The pace of expansion remained at the weakest level since the third quarter of 2016 mainly due to a drop in consumer spending amid a series of railway strikes and a string of national holidays.

In the second quarter of the year final domestic demand added 0.2 percentage points to GDP growth, namely gross fixed capital formation (0.2 percentage points) and government spending (0.1 percentage points), while household consumption subtracted 0.1 percentage points. Also, changes in inventories added 0.3 percentage points, but net foreign demand subtracted 0.3 percentage points.

Within domestic demand, fixed investment increased by 0.7 percent, much faster than a 0.1 percent rise in the previous quarter, mainly due to a pick-up in corporate investment (1.1 percent vs 0.1 percent in Q1). Also, government expenditure went up 0.4 percent, compared to a 0.2 percent gain in the prior quarter. By contrast, household spending contracted by 0.1 percent, following a 0.2 percent advance in the first quarter. It was the first quarterly drop in private spending since the third quarter of 2016, as consumption of goods continued to decline (-0.3 percent vs -0.1 percent) and that of services slowed (0.1 percent vs 0.4 percent). In particular, consumption of food products fell sharply (-1.3 percent vs -0.3 percent), as well as expenditures on energy (-1.7 percent vs 0.8 percent) due to temperatures higher than the seasonal norms in April. In services, the slowdown was notably driven by the downturn in transport expenses (-3.2 percent vs 1 percent), mainly in rail transport as a result of strikes.

Foreign trade balance contributed negatively to GDP growth, as imports jumped 1.7 percent (vs -0.3 percent in Q1) and exports grew at a softer 0.6 percent (vs -0.4 percent in Q1).

Year-on-year, the economy expanded by 1.7 percent in the second quarter, following a 2.2 percent growth in the previous three-month period. 

French Q2 GDP Growth Weaker than Expected

Insee | Rida |
7/27/2018 8:36:24 AM