French economic growth contracts in Q2 on sharp decline in inventories

The French economic growth contracted in the second quarter by 0.1 percent following a growth of 0.7 percent in the previous quarter, according to French official statistics agency, INSEE. The second quarter growth was revised down from the initial estimate of 0.0 percent. According to INSEE, the slowdown in the economy was due to sharp fall in inventories that negatively contributed 0.7 percentage points to the headline figure.

Household final consumption expenditure dropped 0.1 percent in the second quarter, along with a 0.2 percent fall in the total gross fixed capital formation. The final domestic demand, excluding inventory changes and with public expenditure, made zero contributions to the headline figure. Meanwhile, imports fell sharply by 1.8 percent, whereas exports rose a bit by 0.2 percent. Therefore, foreign trade balance positively contributed 0.6 percentage points to the GDP growth.

In the meantime, household purchasing power slowed a bit in the June quarter. In nominal terms, consumers’ gross disposable income decelerated to 0.3 percent rise after increasing 0.5 percent in the earlier quarter. This is predominantly because of a slowdown in wages received by consumers. Household consumption prices rose a bit in the second quarter by 0.1 percent. Therefore households’ purchasing power kept on rising; however slowed more sharply than GDI.

The non-financial corporations’ profit ratio dropped a bit in the second quarter to 31.7 percent from 32.1 percent. Meanwhile, the general government deficit dropped 0.2 GDP points and reached 3.2 percent of GDP, according to INSEE.