Published by Global Banking and Finance Review
Posted on January 30, 2025
PARIS (Reuters) -France's economic activity retreated slightly in the fourth quarter despite firm consumer spending as the boost from the Paris 2024 Olympic Games waned, statistics agency INSEE said on Thursday.
The euro zone's second-biggest economy contracted 0.1% in the last three months of 2024 after an unrevised 0.4% expansion in the third quarter, preliminary data from INSEE showed.
The Olympic Games underpinned French third-quarter growth due to sales of household services, tickets and broadcasting rights, INSEE said.
Domestic demand contributed positively to gross domestic product in the fourth quarter as consumer spending cooled only slightly after the Olympics boost as vehicle sales jumped ahead of the introduction of new regulations.
"While growth had been driven by public spending and external demand in the past three years, private domestic demand is finally showing some signs of life," Societe Generale economist Fabien Bossy said in a research note.
Household spending, traditionally the motor of French growth, rose 0.4% in the quarter after a 0.6% rise in the previous three months, while business investment held steady whereas in previous quarters it had pulled back.
Foreign trade remained a drag on activity in the last quarter of the year as exports declined, while imports rebounded. Meanwhile, a drawdown in corporate inventories also weighed on growth.
A Reuters poll of 30 economists had on average forecast that growth would be flat in the fourth quarter, with estimates ranging from -0.2% to +0.3%.
The year-end performance left France with full-year growth of 1.1%, unchanged from the previous year and in line with the government's forecast.
The government has based its 2025 budget plan on a forecast of 0.9% growth, although the outlook for the budget itself is unclear due to volatile domestic politics and the prospect of trade tensions with the United States.
"The 2025 outlook is not encouraging especially as Donald Trump's unpredictability looms over the global economy," Asteres chief economist Sylvain Bersinger said in a research note.
(Reporting by Michal Aleksandrowicz in Gdansk and LEigh Thomas in Paris; Editing by Christopher Cushing, Sharon Singleton and Hugh Lawson)
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