French growth stagnated in the second quarter of the year, statistics bureau INSEE reported today, a "disappointing" result that dashed hopes of a small economic expansion.
France's gross domestic product (GDP) showed no change in the three months to June, according to a first estimate, after rising a revised 0.7 per cent in the first quarter. The finance ministry called the flat figure "disappointing", given that INSEE had predicted 0.3 per cent growth and the Bank of France 0.2 per cent.
The ministry said, however, it stood by its own growth forecast of 1.5 per cent for 2016. But such optimism had analysts scratching their heads. "Which factors could possibly reverse the trend and give us growth drivers which would allow reaching the 1.5 per cent promised by the government?" asked Philippe Waechter, chief economist at Natixis.
Consumer spending stagnated, having driven growth with a 1.2-per cent increase in the three previous months, INSEE said. Food spending dropped, as did services as start-of-year spending on tickets and accommodation for the Euro 2016 football championships dropped out of the equation, INSEE said. Mathieu Plane, of economic think-tank OFCE, called the French slowdown "very pronounced" as well as "pretty surprising".
Given the end of austerity policies in France and accommodating monetary policy by the European Central Bank, "We should be expecting growth picking up", Plane said. "But that's not happening," he told AFP. "That's not good."
Investment, which fell for both companies and the public sector, will be key rekindling growth, Natixis's Waechter said, warning however that Brexit, attacks in France, and uncertainty surrounding the upcoming US election should be expected to put the brakes on capital spending. "All these factors produce uncertainty and may well prompt company chiefs to delay investment," he said.
Oil refinery strikes in May and June weighed on overall production, which dropped 0.2 per cent, and the construction sector also weakened. France's trade balance, however, made a positive contribution of 0.3 percentage points to GDP thanks to a sharp slowdown in imports of manufactured goods and oil products.