French economic growth was lacklustre at the start of 2017, defying hopes that the second largest economy in the Eurozone had proven broadly resilient to political risks as it headed for a key presidential election.

France’s quarterly GDP growth slowed to 0.3% in the first quarter, from 0.5% in Q4 of last year and below an average forecast of 0.4% from economists surveyed by Bloomberg. GDP growth in the fourth quarter was however revised upwards from 0.4%.

Annualised growth reached 0.8%, according to a first official estimate from Insee – the worst performance since 2014.

France is currently between votes in a presidential election where the economy has taken centre. The final round vote next weekend will be fought between pro-EU, market friendly centrist Emmanuel Macron and the Frexit-supporting far-right Marine Le Pen.

The unpredictable race had generated significant market uncertainty earlier this year, but prospects for the economy could brighten as polls show Mr Macron will emerge as a clear victor in the race for the Elyseé Palace after five years of a Socialist government.

A former French economy minister under outgoing president Francois Hollande, Mr Macron is promising to revive growth and employment by freeing up labour regulations and cutting the tax burden on the self-employed. He has also vowed to push ahead with Eurozone reforms and repair the Franco-German relationship in the EU.

Still, France’s first quarterly growth performance will prove disappointing after a host of survey data from French households and businesses have shown confidence levels at the highest since the Eurozone crisis.

Geoffrey Minne, economist at ING, said: “Despite the fact that consumer confidence has slowly been recovering since 2015 and is now at levels not seen since 2007, the first quarter might have been dented by the political uncertainty”.

Insee said the slowdown was driven by stagnant household spending which moderated to grow 0.1% from 0.6%, while exports shrunk by 0.7% after a 1.4% climb in Q4.

In more reassuring news, investment growth advanced to 0.9% from 0.6%. The overall GDP reading was in line with a forecast from the Banque de France, which expects annual growth to hit 1.3% this year.

After years of trailing behind its key Eurozone rival Germany, a measure of private sector growth in April shows the French recovery has managed to outdo the EU’s largest member state for the first time since the continent’s debt crisis in April.

 

News you might like