French economy unexpectedly contracts as exports slump in third quarter

French Economy Contracts in Third Quarter Amid Export and Investment Slump

Analysis of France's Third Quarter Economic Performance

Overview of Third Quarter Contraction

Oct 30 (Reuters) - The French economy contracted 0.1% in the third quarter, missing analysts' expectations for slight growth, as lower exports weighed on the euro zone's second-biggest economy, official preliminary data showed on Friday.

Analysts polled by Reuters were expecting a 0.1% increase over the third quarter, after no growth in the previous three months.

Key Factors Behind Economic Decline

Export Downturn

The economy was affected by a fall of 4.5 percentage points in exports, to -1.7%, mainly linked to a 9.1% decline in exports of transport equipment, with aerospace as the main negative driver, versus 20.8% growth in the second quarter.

Investment Weakness

Gross fixed capital formation, national accounts’ main measure of investment, fell 0.6% in the third quarter, extending a 0.5% decline in the second, as construction and transport equipment investments dragged on business spending.

Political and Social Unrest

France has been hit by a wave of protests in the final weeks of the quarter, which began with small student demonstrations in suburban Paris in September to denounce school conditions and swiftly broadened into a wider protest against the government's economic policies.

Areas of Resilience

Household Consumption

Household consumption, however, continued to rise by 0.4% in the quarter, following a 0.2% increase in the three months prior.

Transport Equipment Purchases

"Consumption of transport equipment is on the rise again, driven in particular by purchases of electric vehicles," statistics office Insee said.

Energy Consumption

Energy consumption also rebounded, rising 1.2% after a 2.0% fall in the previous quarter, due to increased spending on electricity, Insee said.

(Reporting by Mathias de Rozario in Gdansk, editing by Milla Nissi-Prussak)