French GDP falls 0.1% in Q3, missing forecast of 0.1% growth
France's economy shrank 0.1% quarter-on-quarter in the third quarter, well below the 0.1% expansion expected and down from flat growth in Q2, adding to concerns about the eurozone's second-largest economy.
The annual figure also came in below the 0.3% forecast and slowed from the prior 0.5% pace, according to preliminary data. It marks a third straight weak quarter after stagnation in Q2 and a 0.2% decline in Q1.
Within the breakdown, household spending was a bright spot, picking up to 0.4% from 0.2%. Investment stayed soft, down 0.6% after a 0.5% drop the previous quarter. The sharpest decline came from exports, which fell 1.7% after jumping 2.8% in Q2, dragging net trade down by 0.6 percentage points. Inventory build added 0.4 percentage points, while domestic demand contributed a further 0.1 percentage points.
The weak reading underscores an economy struggling with falling investment and softer demand from abroad, at a time when France’s own budget constraints leave little scope for fiscal stimulus to offset the slowdown.
For the European Central Bank (ECB), the data is unlikely to shift policy on its own, since much of this weakness is already reflected in bond markets. Still, it adds to arguments for caution on further monetary tightening, even as the ECB continues to weigh that against its mandate to keep inflation under control. Should similar softness emerge elsewhere in the eurozone, the case for additional rate hikes could become harder to sustain going into next year.
Why it matters for markets: A larger-than-expected contraction in France’s GDP feeds into expectations for ECB policy, which can move EUR/USD and German Bund and French OAT yields. Weak eurozone growth signals also tend to weigh on European equity indices such as the Euro Stoxx 50.
Source: investingLive