Prior -0.2%GDP Y/Y +0.5% vs +0.7 expectedPrior +0.9%
France’s economy stagnated in the second quarter of 2026, with real GDP unchanged from the previous quarter after contracting 0.2% in Q1. While a sharp rebound in exports helped stabilize growth, household purchasing power weakened further and savings fell markedly as inflation accelerated.
Household consumption returned to growth during the quarter, rising 0.3% after a 0.3% decline in Q1. However, investment remained a drag on activity, with gross fixed capital formation falling 0.3%, reflecting continued weakness in market services investment and a further decline in construction activity. Government consumption provided modest support, increasing 0.4%.
The main positive driver came from external trade. Exports rebounded 2.9% after a 3.0% decline in the previous quarter, boosted in particular by the aeronautics sector. Imports also recovered but at a slower pace, rising 1.1%. As a result, net trade contributed 0.6 percentage points to GDP growth, offsetting weakness elsewhere in the economy.
That support was largely counterbalanced by inventory movements, which subtracted 0.7 percentage points from growth after having added 0.9 percentage points in the first quarter.
Despite household disposable income increasing 0.5% in nominal terms, stronger consumer price growth eroded purchasing power. Household prices accelerated by 1.0% during the quarter, resulting in a 0.5% decline in real disposable income and a 0.6% fall in purchasing power per consumption unit. Faced with declining real incomes, households reduced their savings rate to 17.2% from 17.9% in the previous quarter as consumption recovered.
Labour market indicators remained subdued. Total hours worked declined for a second consecutive quarter, falling 0.1%, while overall employment was broadly unchanged. Small gains in self-employment offset continued weakness in salaried jobs.
Corporate profitability showed resilience despite higher energy costs. The profit margin of non-financial corporations held steady at 31.5% of value added, unchanged from the first quarter. Rising energy prices weighed on margins through a deterioration in the terms of trade, but this was largely offset by lower real wage costs.
Public finances showed little change during the quarter. The general government deficit remained at 5.1% of GDP, with higher tax and social contribution revenues broadly matched by increased spending on social benefits and interest payments.
This article was written by Giuseppe Dellamotta at investinglive.com.