Data from INSEE on 28 February 2025 indicates that France’s GDP for the fourth quarter remained unchanged at -0.1% compared to the preliminary estimate. The slight contraction at the end of the year is attributed to changes in inventory and trade.
Overall, the French economy recorded a growth rate of 1.1% for the full year of 2024, which is consistent with the growth reported in 2023.
That the economy shrank slightly in the last three months of the year and yet matched the previous year’s growth overall tells us something about how different sectors moved in opposite directions. Businesses adjusted their stock levels, and trade activity slowed, both of which were enough to keep the final numbers in negative territory for that period. But this did not derail the yearly figure, which remained steady at 1.1%.
Household spending edged up by 0.3% in the fourth quarter, which helped soften the weakness in trade. But this was the slowest rise since the start of the year. Meanwhile, investment fell. These details confirm that consumers still supported demand, though not as much as before, and businesses were more cautious about expanding. That pattern leaves little in the way of surprises—but it sets up expectations that cannot be ignored.
Export numbers weakened, falling by 0.4%, while imports declined further, down 1.2% after a sharper drop of 2.4% in the previous quarter. That gap between exports and imports actually helped prevent the economy from shrinking more. But it raises another question: if trade continues on this path, how much longer can it support growth before becoming a drag instead?
Fabien, the head economist at Banque de France, pointed out that lower demand in key export markets weighed on French trade. At the same time, domestic demand is still playing its part, though not as strongly as before. If investment remains weak and exports do not recover, we may not see much improvement in the quarters ahead.
Another factor is inflation. Consumer prices rose at a slower pace in recent months, which gave households some relief, but businesses are still facing higher costs. Gilles at INSEE noted that lower energy prices helped keep overall inflation in check, yet core inflation—excluding energy and food—has not eased as much. If that trend holds, the squeeze on corporate margins may continue, shaping how firms set prices and wages in the near future.
Meanwhile, the European Central Bank has signalled it is watching inflation closely, but it has not moved to cut rates yet. That means financing conditions remain tight. For firms and individuals relying on credit, borrowing remains expensive, which feeds back into investment and spending decisions. We cannot ignore what this means in the short term, especially if the ECB holds back on cutting rates for longer than markets expect.
Across the labour market, hiring has slowed but not reversed. Wage growth remains above inflation, supporting spending power for now. But if companies start seeing sustained pressure on profits and demand softens further, recruitment decisions could change. That remains a risk heading into the coming months.
With these shifts in trade, inflation, and rates shaping how businesses and consumers act, the next round of economic data will likely confirm or challenge what we have seen so far. If policymakers respond with adjustments of their own, that could alter expectations yet again. We are watching closely.
