French Economy Unexpectedly Stagnates In Q1

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France's economy stagnated in the first quarter of this year, defying expectations for a modest growth, amid a sharp fall in consumption and slower investment growth as the war in Ukraine and rising inflationary pressures damped activity.

Gross domestic product was unchanged from the fourth quarter when the economy expanded 0.8 percent, revised from 0.7 percent, preliminary data from the statistical office INSEE showed Friday. Economists were looking for 0.3 percent growth.

The economy stagnated due to weakness in domestic demand, INSEE said.

Household consumption fell 1.3 percent after a 0.6 percent increase in the previous three months, led by steep decline in spending on hotels and restaurant services, and on clothing and textiles.

Growth in gross fixed capital formation eased to 0.2 percent from 0.3 percent. Investments in transport equipment fell sharply again.

Internal demand excluding inventory changes contributed -0.6 points to GDP growth, after +0.5 points in the previous quarter.

Export growth slowed to 1.5 percent from 3.5 percent. Transport equipment shipments jumped in the first quarter due to the delivery of a cruise ship. Imports increased 1.1 percent after a 3.2 percent gain in the previous three months.

The contribution of foreign trade to GDP growth was slightly positive this quarter at 0.1 points after 0.0 in the previous quarter.

The contribution of inventory changes to GDP growth was positive again this quarter at 0.4 points after 0.3 points in the fourth quarter.

Separate data from INSEE showed Friday that consumer spending on goods decreased 1.3 percent month-on-month in March after a revised 0.9 percent increase in the previous month. Economists were looking for a 1.2 percent growth.

This decrease was mainly driven by the steep decline of the consumption of food products and, partly by the decrease in energy consumption, the statistical office said.

For the first quarter as a whole, household consumption of goods dropped 1.7 percent.

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