Financial News: French Economy Stalls In Q1; Inflation Accelerates

French Economy Stalls In Q1; Inflation Accelerates

(RTTNews) - France's economy remained flat in the first quarter due to sluggish domestic demand and weaker exports and consumer price inflation hit the highest since mid-2024, driven by surging energy prices, official data showed Thursday.

Gross domestic product stalled in the first quarter after expanding 0.2 percent in the fourth quarter, according to the first estimate from the statistical office INSEE. GDP was expected to grow 0.2 percent.

On the expenditure-side, final domestic demand was sluggish and foreign trade contributed negatively to growth.

Household consumption dropped 0.1 percent, in contrast to a 0.4 percent rise in the prior quarter. Likewise, gross fixed capital formation decreased 0.4 percent, following a 0.3 percent rise in the fourth quarter. Growth in government spending held steady at 0.4 percent.

Overall, the contribution of domestic demand, excluding inventories, to GDP growth was zero this quarter.

The contribution of foreign trade to GDP growth was strongly negative by 0.7 points in the first quarter as exports fell sharply by 3.8 percent and imports declined 1.7 percent.

On the other hand, the contribution of inventory changes to GDP growth was strongly positive by 0.8 points.

Another data from the statistical office INSEE showed that household spending rebounded in March driven by increased engineered goods consumption. Household spending rose 0.7 percent, reversing a 1.4 percent fall in February.

Engineered goods consumption rose 1.6 percent and energy consumption edged up 0.1 percent.

The preliminary estimate showed that consumer prices rose 2.2 percent year-on-year in April, marking the fastest rise since July 2024. Prices were expected to rise 2.0 percent after climbing 1.7 percent in March.

Likewise, EU harmonized inflation advanced more-than-expected to 2.5 percent from 2.0 percent in March, compared to an anticipated 2.3 percent.

The increase in inflation largely reflects the 14.2 percent surge in energy prices. Prices of services picked up 1.9 percent, while food price inflation softened to 1.3 percent.

On a monthly basis, consumer prices rose for the third straight month. Prices grew 1.0 percent in April, the same rate as in March. At the same time, the harmonized index of consumer prices moved up 1.2 percent, slightly faster than the 1.1 percent increase seen in March.

In a separate communiqué, the statistical office said producer prices rose 0.2 percent year-on-year in March, in contrast to the 2.4 percent fall in February. Compared to February, producer prices registered 2.0 percent growth, in contrast to the 0.3 percent drop in the previous month.

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