France’s economy grew slightly faster than expected in the second quarter, driven by a boost in exports from the delivery of a cruise ship, despite flat consumer spending, according to official data released today.
Finance Minister Bruno Le Maire noted that this performance suggests growth will likely exceed the outgoing government’s 1% forecast, especially with the Olympic Games expected to boost activity in the third quarter.
The euro zone’s second-largest economy grew 0.3% in the three months leading up to the end of June, maintaining the same growth rate as the revised figure for the first quarter, according to preliminary data from the statistics office INSEE. This growth surpassed the average expectation of 0.2% in a Reuters poll of economists.
This unexpected increase offers some relief to the government, which faced criticism earlier this year for lowering its 2024 growth forecast from 1.4% to 1% and raising its budget deficit estimates. “We will probably have growth that is better than the 1% forecast in February,” Le Maire told journalists. “For two years, France has outperformed; our economic policies are working and delivering tangible results.”
Le Maire added that the stronger-than-expected growth could positively impact the strained budget deficit, emphasizing the need for France to continue reducing spending.
France is currently in a political impasse after President Emmanuel Macron’s snap parliamentary election in June resulted in a hung parliament. The left-wing alliance that emerged victorious in the election aims to form a government and implement a new tax-and-spending agenda to radically alter France’s economic course.
INSEE reported that consumer spending, traditionally the main driver of French growth, remained stagnant in the second quarter. Domestic demand increased by only 0.1%, primarily due to a slight rise in business investment and a 0.6% increase in public investment.
Foreign trade contributed 0.2 percentage points to GDP, with the delivery of the Utopia of the Seas cruise ship to Royal Caribbean boosting exports by 0.6%, while imports remained unchanged.
Despite the political crisis affecting business morale, economic activity is projected to reach 0.5% in the third quarter, with a boost from the Olympic Games currently underway, according to INSEE’s forecast earlier this month.
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