This is not what one would call a grand start. Hampered by a delayed budget vote, the need to reduce the public deficit and a tense international climate, the French economy grew by only 0.1% in the first quarter, according to initial estimates published on Wednesday, April 30, by the National Institute of Statistics and Economic Studies (INSEE). This figure meets expectations and follows a sluggish 2024, where growth reached just 1.1%.
On April 10, the government reduced its growth forecast to 0.7% from 0.9%, citing the negative consequences of the trade war initiated by Donald Trump. Can this target be met? "It's not unrealistic," said Maxime Darmet, an economist at Allianz Trade. "It's going to be a battle!"
"We are going to support the businesses," said Economy Minister Eric Lombard on Sud Radio Tuesday, shortly after the figures were released. Despite this lackluster first quarter, the growth carryover already stands at 0.4%, estimated Marie Leclair, head of the national accounts department at INSEE. According to the institute, GDP would need to increase by 0.2% over each of the next three quarters to reach 0.7%.
The Banque de France, which provided the growth forecast on which the Ministry of Finance relies on, remained cautious. "We will update [our forecast] in June," said Governor François Villeroy de Galhau on Monday. "Why aren't we updating today despite these protectionist threats? Because it's very difficult to isolate one factor from all the others. There are many uncertainties. Some elements could have a positive impact, such as the recovery in Germany."
These multiple uncertainties on the international front are compounded by a certain gloom at the national level. Consumption stagnated in the first quarter and even dropped significantly (-1%) in March. However, "consumers are starting to recognize the disinflation," noted Stéphane Colliac, an economist at BNP Paribas. "Confidence has stabilized but hasn't fully rebounded, especially as fears of unemployment and concerns about future living standards have increased."
This is reflected in declining food and tobacco consumption, as well as a significant drop in spending on cars, motorcycles and bicycles. Conversely, spending on services remains positive, confirming a shift in consumption habits. "Consumption of goods is 7% below 2019 levels, while that of services is 15% to 20% higher," said Anthony Morlet-Lavidalie, an economist at Rexecode.
Investment is also particularly bleak, declining by 0.2% over the quarter. Few sectors escape the downturn: construction, automotive fleet purchases, transport equipment and capital goods. "Given the uncertainties, business leaders prefer to hold onto cash and tighten recruitment projects," said Morlet-Lavidalie. All of this is unfolding in a context of reduced public spending, due to budgetary constraints.
Foreign trade, a growth driver in 2024, has come to a standstill. Its contribution at the beginning of the year is distinctly negative (-0.4 points). Exports have dropped significantly (-0.7%), while imports continued to rise (+0.4%). "France hasn't benefited from the frontloading, which involves preemptively buying products that will be hit by tariffs," said Darmet. "This phenomenon is pronounced in the United States, where imports have increased significantly, but few come from Europe."
Despite stagnant demand, production picked up slightly in the first quarter, particularly in the agri-food, transport equipment and pharmaceutical industries. "As consumption is sluggish and exports are declining, stocks are increasing," said Leclair. In the absence of strong consumption or investment, they have thus contributed positively to growth by 0.5% this quarter. Without stock variation, growth would have been clearly negative (-0.4%), said Sylvain Bersinger of the Asterès firm.
Economists see little momentum for the rest of the year, given the lack of global clarity and weak consumer demand, even if April's business climate wasn't so bad. One consolation: "The price index in France remains below the European average, unemployment trends weigh on costs, energy prices are declining and services are slowing down," said Colliac. "Inflation will not rebound." In April, prices rose by 0.8%, according to figures also released by INSEE on Wednesday. The central scenario remains one of low growth without inflation.
Translation of an original article published in French on lemonde.fr; the publisher may only be liable for the French version.