France's economy contracted unexpectedly in the third quarter, shrinking 0.1% from the previous three months after recording no growth in the second quarter, preliminary data from the national statistics office INSEE showed on Friday. Analysts polled by Reuters had expected the euro zone's second-biggest economy to grow by 0.1%.
Source: Reuters
Exports were the main drag. They fell 1.7% in the July-September period after rising 2.8% in the second quarter, while imports edged up just 0.1%, so foreign trade subtracted 0.6 percentage points from overall growth, according to the INSEE figures reported by dpa-AFX. Exports of transport equipment plunged 9.1%, reversing a 20.8% jump in the previous quarter, with aerospace the main negative driver, Reuters reported.
Source: dpa-AFX via TradingView
Investment also weakened again. Gross fixed capital formation fell 0.6% in the third quarter, extending a 0.5% decline in the second, as construction and transport-equipment investment dragged on business spending, INSEE said. Manufacturing output fell 1.4%, with weakness across transport equipment, food production and other manufactured goods.
Households provided the one bright spot. Consumer spending rose 0.4%, faster than the 0.2% increase in the previous quarter, helped by purchases of electric vehicles, while energy consumption rebounded 1.2% after a 2.0% fall. Government spending rose 0.3%, and changes in inventories added 0.4 percentage points to growth.
The weak quarter caps a difficult year for France, which, based on INSEE's latest figures, shrank 0.2% in the first quarter, stagnated in the second and contracted again in the third — though the flat middle quarter means this is not technically two consecutive contractions. The economy was also hit in the final weeks of the quarter by a wave of protests that began with student demonstrations in suburban Paris in September and broadened into wider action against the government's economic policies, Reuters noted.
Separate preliminary INSEE figures put annual consumer inflation at 3.4% in October, up from 3.1% in September, adding to the cost-of-living pressure behind the unrest. Both sets of figures are preliminary and subject to revision: INSEE is due to publish final October inflation data on November 13 and detailed third-quarter national accounts on November 27.
France is the euro zone's second-largest economy, so a contraction driven by collapsing aerospace and transport exports — alongside the ECB's warning the same day that firms expect higher wage demands — signals the energy-fuelled cost shock from the Iran war is still working through Europe's factories and pay packets.