French Economy Outperforms Predictions with Q1 Expansion

The French economy saw modest growth in the first quarter of 2024, with a 0.2% expansion, slightly surpassing expectations. The National Institute of Statistics (INSEE) highlighted that this improvement followed a 0.1% growth in the final quarter of 2023. The growth has been primarily attributed to an increase in household consumption, which rose by 0.4%, and business investment, which grew by 0.5%.

While household spending showed resilience, household investment experienced a decline, falling by 1.5% over the quarter. Furthermore, the contribution of net trade to GDP was neutral, with both imports and exports adding 0.5%. Notably, the services sector acted as the main driver of the growth, with output increasing by 0.8%, whereas manufacturing output saw a marginal decline.

Inflation rates have also shown signs of easing, with consumer prices rising by 2.2% in April, down from 2.3% in March. The government has revised down its full-year growth forecast for 2024 to 1% from the earlier prediction of 1.4%, adjusting its budget deficit expectations accordingly. Despite the growing public deficit, which has exceeded government estimates, the current data points towards a stronger economic performance than anticipated, marking the strongest growth in three quarters with a year-on-year expansion of 1.1%.