French GDP increases but less than predicted growth rate

The French government recently announced their quarterly report on its current economy. The results showed that the growth only went from 0.1% to 0.2% from the second quarter which was less than what economists expected. Although there was a visible growth compared from the previous quarter of the year, the outcome was still weaker than anticipated which was supposed to be a growth up to 0.3%.

Currently, the country’s economic stand is still trying to recover after it contracted in the last three months of the year.

Several factors contributed on the slow economic growth of the country which included the decline in consumer spending last September. Majority of households held back on the consumption of manufactured goods and spent less on energy and resource consumption as a whole.  There was also an increase on government expenditures by 0.4% for the third quarter running.

Last September, it has been reported that consumers had cut their spending mostly on energy by 1.7%. The manufactured goods spending also remained the same level as August declines expenditures on clothing and cars compensate and spending was more on home furnishings.

According to France’s national statistics bureau, Insee, French consumers are the main pillars of economic growth in the country and the weak economic increase was caused by hesitant households during the span of the third quarter.

Declining business investments was another huge aspect on the weak growth. Several French companies were undecided on several matters which resulted in cutting of their investments to 0.3% quarter-over-quarter for the 2^nd quarter in a row.

Another contributing cause on the country’s slow economic growth since last quarter of the year was due to the drag on its tourism industry as a result of the recent terrorist attacks in the country. The terrorist attack which occurred last July had greatly affected the country’s tourism industry as it was heading towards its usual peak season.

Michel Sapin, French finance minister, said that the weaker-than-expected economic growth would make it difficult for the country to reach the government’s goal of 1.5% growth target by the end of the year. This would mean that France needs to exert extra effort into focusing on the contributing factors as to why there was only a 0.1% growth from the last quarter.

The lack in economic improvement from the second quarter gave major setbacks for embattled President Francois Holland, who planned that his political plans for the country would be an economic improvement which hopefully could shrink the unemployed population in the country.

The market reaction was limited only to EUR/USD holding just above the 1.0900 level.

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