France: Economic growth picks up in the third quarter
Q3 GDP growth beats expectations: A preliminary release of French national accounts revealed that the economy grew 0.5% on a seasonally adjusted quarter-on-quarter basis in Q3, following 0.3% growth in the prior quarter. The reading marked an over two-year high, surpassed market expectations and outshone fellow regional heavyweights Germany and Italy despite political turmoil.
On an annual basis, economic growth rose 0.9% in Q3 following the prior quarter’s 0.7% expansion.
External sector drives strong quarterly print: Compared to the prior period’s data, readings in Q3 improved for fixed investment (+0.4% on a seasonally adjusted quarter-on-quarter basis vs 0.0% in Q2) and exports of goods and services (+2.2% vs +0.3% in Q2). In contrast, the reading for imports of goods and services worsened in Q3 (-0.4% vs +1.4% in Q2). Finally, the variations in government and private consumption matched the previous quarter (+0.5% and +0.1%, respectively). Overall, final domestic demand contributed 0.3 percentage points to growth, while external trade contributed 0.9 percentage points to the headline figure. Less positively, inventories dragged down GDP growth by 0.6 percentage points.
On the external front, exports surged in Q3 on the back of rising shipments tied to the aerospace industry and frontloading ahead of U.S. 15% tariffs on EU goods and services from August. Domestically, fixed investment growth offset weak private spending growth in the quarter, as household spending—France’s usual growth driver—remained subdued, likely due to political turmoil and uncertainty.
GDP growth to cool in coming quarters: GDP growth is set to ease from its current high in the coming quarters; our panelists expect seasonally adjusted sequential GDP growth to grind to a near halt in the final quarter of this year. That said, momentum should pick up in 2026, as GDP growth is seen accelerating from 2025 projected levels on healthy domestic demand growth and a sharp rise in exports. That said, the outlook remains uncertain as further political turmoil poses a downside risk and budget negotiations are key to track.
Panelist insight: ING’s Charlotte de Montpellier was downbeat on the outlook:
“The outlook for the future is rather uncertain. Political and budgetary uncertainty is likely to weigh on growth momentum. Still, improving business sentiment and consumer confidence in October suggest the impact could be smaller or delayed. […] That said, several warning signs persist. Global demand is slowing. Household savings intentions have hit record highs, making a drop in the savings rate unlikely.”