PARIS (Reuters) – French activity will rebound in the third quarter, supported by the Paris Olympic and Paralympic Games (Olympics), as well as a recovery in household consumption, INSEE said in an economic note on Tuesday, which nevertheless warned that the uncertain political situation constitutes a risk for this outlook.
Growth in the third quarter will reach 0.5% over three months after 0.3% in the previous quarter, estimates the National Institute of Statistics, with activity benefiting from the Olympic Games which will add 0.3 percentage points to quarterly growth and 0.1 points to annual growth, thanks mainly to ticket purchases, the sale of broadcasting rights and increased tourism.
As a result, activity would decline by 0.1% in the fourth quarter, to rise by 1.1% in 2024, as last year, calculates INSEE in its note entitled “GDP, Games, Unknowns”.
The French economy will also benefit from the improvement in household purchasing power, which will fuel consumption: this should accelerate to 0.5% in the second quarter, and to 0.7% in the third quarter, supported by the Olympic Games, after an increase of 0.1% at the start of the year.
Conversely, business investment is still suffering from the tightening of financing conditions and will remain sluggish in the second half of the year.
Foreign trade would also have a clearly positive impact on growth, of the order of 0.9 percentage points, with the rebound in exports continuing with the adjustment of inventory levels, the recovery in aeronautical orders and the Olympic Games.
Inflation is expected to continue its decline and reach 1.9% over one year in December 2024, supported by the price of services which reflect past wage increases, without however indicating a price-wage loop, estimates INSEE.
Inflation reached 2.1% in June, according to a provisional estimate, and 2.3% in May.
The Institute’s forecasts, initially expected on June 18 but declared due to the electoral reserve period, do not, however, include the possible impact on the activity of the legislative elections.
Dorian Roucher, head of the economic situation department, points out that business morale generally rebounds after an election, but that the unusual situation makes any projection difficult.
(Written by Corentin Chappron, edited by Augustin Turpin)
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