Growth fell by 0.1% in the 3rd quarter: France on the verge of recession

Bad news for the French economy. France's gross domestic product (GDP) fell by 0.1% in the third quarter, INSEE announced on Friday October 30. It stagnated in the second quarter (0%) and fell, to everyone's surprise, by 0.2% in the first.

In total, the “growth carryover” at the end of the third quarter, that is to say what growth would be over the year if GDP remained stable in the fourth quarter, is 0.2%, making it difficult to reach the 0.5% still predicted by the government, and even the 0.4% anticipated by the National Institute of Statistics itself and the Bank of France.

In these circumstances, "it would take 0.9% growth in the last quarter to be able to reach 0.5% over the year", the government forecast, "and 0.5% to reach 0.4% over the year", the most recent forecast from INSEE and the Banque de France, Marie Leclair, the head of INSEE's national accounts department, commented to the press on Friday.

In the first quarter, growth already marked a decline of -0.2%. If they become consecutive, these negative quarters will push France into recession.

The decline in activity is mainly explained by a sharp contraction in exports (-1.7% after +2.8% in the second quarter), particularly in transport equipment (-9.1% after +20.8%), notably aeronautics. Imports, for their part, remained almost stable (+0.1%), all resulting in a negative contribution of 0.6 points from foreign trade to growth in the 3rd quarter.

Final domestic demand, however, attenuates this decline. Household consumption increased over the quarter by 0.4% after +0.2% in the spring, driven in particular by purchases of electric vehicles, the rebound in energy expenditure and the increase in consumption of services, particularly in accommodation and catering and leisure. Public administration consumption also increased by 0.3%.

Conversely, investment fell further (-0.6% after -0.5%), in particular due to a drop in investment in construction (-0.5%), while investment in manufactured products fell by 1.9%, particularly investment in transport equipment.

In total, domestic demand contributed +0.1 point to GDP growth in the third quarter.

On the supply side, manufacturing production contracted by 1.4%, with a marked drop in transport equipment (-3.5%) and agri-food (-1.5%). Construction is also declining (-0.4%). Market services, however, continue to grow (+0.3%), thanks in particular to information-communication, household services and transport services.

Machine-translated from French