Solid French consumer spending eases impact of post-Olympics economic pullback

Yahoo

30-01-2025

PARIS (Reuters) -France's economic activity retreated slightly in the fourth quarter despite firm consumer spending as the boost from the Paris 2024 Olympic Games waned, statistics agency INSEE said on Thursday.
The soft end to the year adds pressure on lawmakers to pass France's 2025 budget, which has been delayed for weeks due to political disputes over spending cuts, weighing on business and consumer morale.
The euro zone's second-biggest economy contracted 0.1% in the last three months of 2024 after an unrevised 0.4% expansion in the third quarter, preliminary data from INSEE showed.
The Olympic Games underpinned French third-quarter growth due to sales of household services, tickets and broadcasting rights, INSEE said.
Domestic demand contributed positively to gross domestic product in the fourth quarter as consumer spending cooled only slightly after the Olympics boost as inflation cooled and vehicle sales jumped ahead of the introduction of new regulations.
"While growth had been driven by public spending and external demand in the past three years, private domestic demand is finally showing some signs of life," Societe Generale economist Fabien Bossy said in a research note.
Household spending, traditionally the motor of French growth, rose 0.4% in the quarter after a 0.6% rise in the previous three months, while business investment held steady whereas in previous quarters it had pulled back.
Foreign trade remained a drag on activity in the last quarter of the year as exports declined, while imports rebounded. Meanwhile, a drawdown in corporate inventories also weighed on growth.
A Reuters poll of 30 economists had on average forecast that growth would be flat in the fourth quarter, with estimates ranging from -0.2% to +0.3%.
"Beyond the mechanical end of the Olympic Games' positive effect, the year-end slowdown underlines the need to adopt a budget to put an end to uncertainties and restore household and business confidence," Finance Minister Eric Lombard said.
A panel of lawmakers was meeting on Thursday to thrash out a compromise budget bill due to hit the floor of the lower house early next week, where it may trigger a no-confidence vote against the government.
The year-end performance left France with full-year growth of 1.1%, unchanged from the previous year and in line with the government's forecast.
The government has based its 2025 budget plan on a forecast of 0.9% growth, which the fiscal watchdog described late Wednesday as "optimistic" and left little margin of error for deficit target of 5.4% of economic output.