Upper ? Less strong ? French GDP in the second quarter revealed Tuesday

Between acceleration in household consumption thanks to the slowdown in inflation and business investment still at half mast due to high interest rates, growth forecasts vary for the period from April to June.

In its economic note published at the beginning of July but based on the pre-electoral situation, INSEE said it anticipated an increase in gross domestic product (GDP) of 0,3% in the second quarter compared to the previous three months, where growth had reached 0,2%. The Banque de France is less optimistic, with growth projected at 0,1%.

Verdict on Tuesday, when INSEE will publish at 07:30 a.m. (05:30 GMT) its first estimate of the level of growth actually achieved over the period.

“A lot of uncertainties”

“There is a lot of uncertainty,” notes Maxime Darmet, economist for the credit insurer Allianz Trade. "All components of investment are in the red, but at the same time, household consumption - 55% of GDP - seems to be doing a little better," he told AFP.

Despite the rate cut initiated by the European Central Bank (ECB) in June, business investment is expected to remain sluggish in the second quarter, as is household investment in the residential sector.

“The credit supply remains restrictive” and it “is locked for many SMEs”, notes Maxime Darmet, against a backdrop of increasing business failures.

He also estimates that the contribution of public spending to growth could dry up, while public finances are in bad shape and the outgoing government has committed billions of euros in savings to restore them - with a target of 25 billion just for 2024, according to Bercy.

Conversely, household consumption, the traditional engine of French growth, should stand out positively, with the slowdown in inflation restoring purchasing power to the French.

In June, the price increase in France reached 2,2% over one year, the lowest in almost three years. According to an INSEE forecast, it should slow further to 1,9% year-on-year in December.

As an annual average, it would stand at 2,2% in 2024, a clear decline compared to 2023 (4,9%). It is now mainly driven by services rather than food.

“There are perhaps first signs that consumers are accelerating their purchases thanks to the fall in inflation,” a trend which should intensify in the third quarter, underlines the Allianz Trade economist. And this, even if the level of household savings remains high (17,1% of income on average over 2024, forecasts INSEE).

INSEE will also publish the figures for household consumption of goods in June on Tuesday morning, while the first estimate of inflation for the month of July will be known on Wednesday.

Between July and September, activity would also benefit from the positive effect of the Olympic and Paralympic Games, estimated by INSEE at 0,3 points on growth, which would reach 0,5%.

“Violent dropout”

This stimulus could, however, be partially offset by the political uncertainty created by the legislative elections, which did not result in any clear majority.

An unfavorable sign for the French economy, the business climate, which measures the morale of business leaders, contracted by five points to 94 in July, the lowest since February 2021. The drop in confidence affects all sectors of activity.

"Can the situation of political blockage caused by the dissolution of the Assembly alone explain this extreme situation? Difficult to say but it is, without context, a very serious warning for the France", warns the RichesFlores firm in a note.

The "drop" in the indicator was "violent (...) to the point of bringing back the hypothesis of a recession", he adds.

INSEE anticipates a contraction of 0,1% of GDP in the fourth quarter. For the whole of 2024, the statistical institute expects growth of 1,1%, similar to that of the previous year and higher than the forecast of the outgoing Macronist government (1%).