French economy grinds to a halt
French GDP revised downwards The second estimate of French GDP growth disappointed. Second-quarter GDP was revised down and is now estimated to have stagnated, compared with the previously reported 0.2% quarter-on-quarter increase. First-quarter growth was also revised lower, to -0.2% from -0.1%. These revisions were driven by weaker-than-expected agricultural output and softer real activity in…
French economic growth fell short of expectations in the second quarter, with the economy stagnating compared to the previously reported 0.2% increase. First-quarter growth also declined, now estimated at -0.2% from the previous -0.1%. The main positive factor was an uptick in household consumption, which rose by 0.3% after a drop in Q1.
However, real purchasing power fell due to inflation. Investment fell by 0.3%, while net trade and inventories remained volatile. Salaries dropped by 0.1%, and overall employment last year decreased by 0.3%. These results hint at a potential technical recession in the first half. France's revised GDP growth forecast of 0.7% is now unrealistic, with only 0.3% annual carry-over growth.
The government must implement more fiscal consolidation measures to keep the public deficit below 5%. The 2026 deficit may exceed the 5.1% recorded in 2025. The European Commission projects a deficit of 5.7% of GDP in 2027, raising public debt to 120.2% of GDP. Government budget discussions will be under scrutiny by bond markets as the 2027 presidential election approaches. Despite inflation, the economy might grow slightly higher but overall prospects remain gloomy.
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