French economy contracts by 0.1% in first quarter

{"text":[[{"start":9.8,"text":"The French economy unexpectedly shrank by 0.1 per cent in the first quarter as French President Emmanuel Macron’s government battles both weak domestic demand and falling exports ahead of presidential elections next year."}],[{"start":24.15,"text":"The country’s statistical office, Insee, on Friday revised down its GDP estimate for the first quarter. It had previously estimated that Europe’s second-biggest economy failed to grow between the start of January and the end of March."}],[{"start":38.15,"text":"The quarterly performance is the worst since late 2024 and comes after 0.2 per cent growth in the final three months of 2025. "}],[{"start":null,"text":"

"}],[{"start":47.7,"text":"France, like other countries in the EU, has been hit by a number of external shocks, including the supply chain disruption triggered by the Iran war and US President Donald Trump’s trade war. "}],[{"start":58.6,"text":"Yet the contraction comes as a surprise because many economists thought that France was better positioned than many of its neighbours to withstand the energy shock from the Middle East and trade ructions given its cheap nuclear power and shallower exposure to rising competition from China."}],[{"start":75.85,"text":"Germany, by contrast, expanded by 0.3 per cent at the start of the year, data last week confirmed. It is only the third time over the past four years that France’s quarterly GDP performance has been worse than in its larger neighbour, according to data from the European Central Bank. "}],[{"start":93.69999999999999,"text":"The disappointing data comes as the French government tries to avoid giving broader financial assistance to households and companies to blunt the impact of high energy prices caused by the Iran war. "}],[{"start":104.89999999999999,"text":"It has said that the conflict’s impact on growth and tailored subsidies to help hard-hit industries such as farming and taxis will cost it at least €6bn, likely putting its deficit-cutting target this year at risk. "}],[{"start":118.35,"text":"The deficit stood at 5.1 per cent of GDP at the end of the first quarter, putting France among the worst performers in the Eurozone. Finance minister Roland Lescure has said that higher interest costs on the debt will amount to at least €4bn this year. In response, the government has announced more cuts to the state budget. "}],[{"start":138.15,"text":"“France seems stuck in a hangover after years of fiscal stimulus,” said Carsten Brzeski, global head of macro at ING, adding that after years of high government deficits the state’s hands are now tied while consumer demand is suffering from political uncertainty in the run-up to next year’s presidential election. "}],[{"start":156.15,"text":"“All this does not bode well for the Euro area’s short-term growth outlook,” Brzeski added."}],[{"start":162.25,"text":"Only a sharp rise in inventories prevented an even bigger fall in French GDP in the first quarter, according to Insee. Stocks held by businesses shot up by 1 per cent during the period after contracting 0.7 per cent in the previous quarter. "}],[{"start":176.75,"text":"The massive swing was driven by aeronautical products and came after “significant destocking in the two previous quarters”, Insee said. "}],[{"start":184.65,"text":"Domestic demand excluding inventories fell 0.2 per cent compared with the previous quarter as both household consumption, normally a key driver of economic growth in France, and corporate investment declined. Exports fell sharply by 3.5 per cent in the first quarter. "}],[{"start":202.6,"text":"However, Isabelle Mateos y Lago, chief economist at BNP, told the FT that she expected a “rebound” in GDP in the second quarter as the “unexpectedly poor performance” at the start of the year was mainly driven by “one-off factors” that will soon reverse. "}],[{"start":218.35,"text":"“We continue to expect the French economy to grow by around 0.8 per cent in 2026,” she said."}],[{"start":225.15,"text":"Lescure insisted that some factors behind the GDP revision would be one-offs. “The second quarter will be important,” he said on Friday. "}],[{"start":233.55,"text":"“There are factors of resilience that are well known,” he added, referring to the country’s fleet of nuclear power stations and its attractiveness as an investment destination. "}],[{"start":242.3,"text":"Figures released earlier this month showed that French unemployment rose 0.2 percentage points to 8.1 per cent in the first quarter, the highest level in five years. "}],[{"start":253.20000000000002,"text":"The rise threatens to tarnish one of Macron’s key economic pledges before his second term in office draws to a close next year. He cannot stand again. "}],[{"start":262.90000000000003,"text":"The far-right Rassemblement National party is polling strongly in the race to succeed him. Its economic programme remains muddy but its arrival at the Élysée Palace would probably lead to higher spending and a more Eurosceptic approach, which economists have said could spark a debt or economic crisis. "}],[{"start":281.25000000000006,"text":"However, inflation in France was slightly better than expected in May as consumer prices rose by 2.8 per cent compared with a year before, according to a first estimate that was also published on Friday. Economists had expected an increase to 2.9 per cent, from 2.5 per cent in April. "}],[{"start":305.2000000000001,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780056568_4135.mp3"}