News

French Economy Slows Down as Production and Exports Decline

James L. Flint

• October 31, 2023

The French economy experienced sluggish growth over the summer due to a slowdown in production and exports, indicating that tight monetary policies are negatively impacting the country's industry.

According to data released by national statistics agency Insee on Tuesday, the second-largest economy in the eurozone grew by 0.1% between July and September compared to the previous quarter. This growth rate is significantly lower than the more dynamic 0.6% increase seen in the prior three-month period. These findings align with economists' forecasts, as reported by The Wall Street Journal.

The data also revealed that exports, which had previously contributed to positive net trade and GDP growth in the second quarter, decreased by 1.4% in the third quarter. Additionally, the manufacturing industry saw a decline of 0.3% in output, primarily driven by weaker production in transportation materials and food sectors. This decline occurred despite a significant increase in refinery production. Insee noted that net trade had a negative impact on overall GDP growth, lowering it by 0.3 percentage points.

The overall growth rate, which includes both goods and services, slowed down to 0.2%.

On a positive note, domestic demand showed improvement due to increased household consumption and investment, according to Insee. Notably, there was an uptick in spending on food following a prolonged period of decline, as reported by the agency.

Eurozone Economy Sees Uptick in Domestic Demand

The latest data on the European economy reveals a notable increase in domestic demand, according to Claus Vistesen, chief eurozone economist at consultancy Pantheon Macroeconomics. While Vistesen acknowledges that this growth may not be sustainable in the long-term, it remains solid for now.

In contrast to this positive development, Germany, the neighboring country, experienced a contraction with its economy shrinking by 0.1% in the third quarter. Although this figure is slightly better than anticipated, economists caution that the struggling manufacturing sector could hinder a full recovery.

Addressing concerns about the bloc's economic performance, the European Central Bank recently announced its decision to maintain interest rates at their current levels. This decision comes as evidence of sluggishness continues to mount across the eurozone. Later today, Eurozone GDP figures will be released, and it is expected that growth will be stagnant following a minor expansion in the previous quarter.

Looking at other major economies within the eurozone, Spain experienced 0.3% growth during the summer quarter, driven by a revitalized tourism sector. Italy is also due to publish its quarterly growth figures later today, with economists predicting a similar 0.1% rise compared to the previous year.