Media365
France’s economy returned to growth in the second quarter, expanding 0.2 per cent from the previous three months as a recovery in household spending and stronger exports helped the eurozone’s second-largest economy withstand geopolitical and trade pressures.
The increase, reported by France’s statistics agency INSEE on Thursday, followed a 0.1 per cent contraction in the first quarter. It was in line with a Reuters poll of economists.
The recovery offers some relief for an economy that has struggled to build momentum amid higher energy costs, supply-chain disruptions and uncertainty stemming from the Iran war and US tariffs.
Household spending, exports support growth
The second-quarter expansion was supported by a pickup in household spending, while exports also provided a boost.
INSEE said higher exports from the aeronautics sector contributed to the recovery, helping offset some of the weakness elsewhere in the economy.
The resilience of French economic activity comes despite a difficult external environment. The conflict involving Iran has disrupted energy markets and supply chains, while US tariffs have added pressure on European exporters.
France has also been dealing with the lingering effects of earlier economic shocks, including Russia’s invasion of Ukraine and the resulting energy crisis. These disruptions have weighed on consumer confidence and business activity.
France cuts 2026 growth forecast
Despite the better-than-expected second-quarter performance, the French government remains cautious about the outlook.
Earlier this month, Finance Minister Roland Lescure cut the government’s 2026 growth forecast to 0.7 per cent from 0.9 per cent, citing a weaker-than-expected start to the year and the impact of the international situation, particularly the conflict in West Asia.
The revised forecast is broadly in line with projections from INSEE, the International Monetary Fund and the Organisation for Economic Co-operation and Development, which have also put French growth at around 0.7 per cent for 2026.
The downgrade came after France’s economy contracted in the first quarter. INSEE’s final figures showed GDP fell 0.1 per cent in the January-March period, with weakness in economic activity weighing on the start of the year.
Iran war remains a key risk
The second-quarter figures suggest that the French economy has so far been more resilient than some had feared. But the outlook remains vulnerable to further disruptions in energy markets and global trade.
The Iran war has pushed up energy costs and created supply-chain uncertainty across Europe. For France, the impact comes on top of already weak momentum and subdued consumer sentiment.
The government has also faced higher spending pressures as it provides targeted support to sectors affected by increased energy costs. At the same time, slower economic growth is weighing on tax revenues and complicating efforts to reduce the budget deficit.
Lescure said the latest GDP figures provided some reassurance that France could still meet the government’s revised 0.7 per cent growth target for the year.
The challenge for Paris will now be to sustain household demand and exports while containing the impact of energy prices, geopolitical tensions and US trade measures on an economy that has struggled to regain strong momentum.
