Higher consumer spending, investment boost French first quarter growth

Higher consumer spending, investment boost French first quarter growth


The French economy gained momentum in the first quarter, growing slightly faster than expected thanks to a pick-up in consumer spending and business investment, official data published on Tuesday showed.

 


Growth in the euro zone’s second-biggest economy rose by 0.2 per cent in the first three months of the year after a 0.1 per cent growth in the fourth quarter of 2023, statistics agency INSEE said in its quarterly GDP report.

 


Economists polled by Reuters had an average forecast of 0.1 per cent growth while the Bank of France had forecast 0.2 per cent growth and INSEE had expected flat growth.

 


The better than expected growth is good news for the government which drew fierce criticism from opposition parties for its handling of the economy after it revised down its full-year 2024 growth forecast to 1 per cent in February from 1.4 per cent and hiked its budget deficit expectations.

 


“To all of those who were wanting to think our economy has stalled out, the facts are stubborn, French growth is improving,” Finance Minister Bruno Le Maire said in reaction to INSEE’s GDP report.

 


Household spending growth, traditionally the main driver of overall French economic activity, accelerated to 0.4 per cent from 0.2 per cent in the fourth quarter of 2023 as inflation pressures eased.

 


Meanwhile, business investment grew 0.5 per cent, bouncing back from a contraction of 0.8 per cent at the end of last year in the face of high interest rates.

 


Economists broadly expect activity to pick up over the course of the year as lower inflation boost consumers’ purchasing power and interest rate cuts fuel an increase in investment.

 


In the latest sign of easing price pressures, INSEE said separately that inflation using the EU-harmonised methodology was unchanged in April from March at 2.4 per cent, the lowest level since August 2021, just before Europe’s inflation crisis began.


Economists polled by Reuters had expected a rate of 2.2 per cent.

First Published: Apr 30 2024 | 2:28 PM IST

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