French economy unexpectedly contracts as exports slump in third quarter

The French economy unexpectedly contracted by 0.1% in the third quarter, falling short of analysts' expectations for slight growth, according to preliminary data released on Friday. The euro zone's second-largest economy was negatively impacted by a sharp decline in exports, which fell by 4.5 percentage points to -1.7%. This decline was primarily driven by a 9.1% decrease in exports of transport equipment, with aerospace being the main contributor to the negative trend.

In contrast to the 20.8% growth seen in the second quarter, exports in the third quarter experienced a significant downturn.

Gross fixed capital formation, a key measure of business investment, also declined by 0.6% in the third quarter, continuing a 0.5% decrease from the previous quarter. This decline was mainly attributed to reductions in construction and transport equipment investments, which dampened overall business spending.

Despite the contraction in economic activity, household consumption managed to grow by 0.4% during the quarter, up from a 0.2% increase in the previous three months. Energy consumption rebounded by 1.2% after a 2.0% decline in the prior quarter, as households increased their spending on electricity. The rise in transport equipment purchases, particularly for electric vehicles, was cited as a catalyst for the increase in consumption.