Inventory Rebuild Drives Modest Quarterly Expansion in French Economy, GDP Up 0.1% Inventory Rebuild Drives Modest Quarterly Expansion in French Economy, GDP Up 0.1%

Key Moments:

France’s GDP increased by 0.1% in Q1, following a 0.1% decline in Q4 2024. Inventory accumulation contributed 0.5 percentage points to GDP, led by the chemicals and pharmaceutical sectors.
Household spending and business investment stagnated, while trade dragged on growth.
The CAC 40 Index rose 0.32% on Wednesday.

Marginal Growth Amid Domestic and Trade Headwinds

France’s economy registered a slight uptick at the beginning of the year, with gross domestic product rising 0.1% in the first quarter, according to preliminary figures released by the INSEE statistics agency on Wednesday. This comes after a 0.1% decline in the previous quarter, underscoring the fragile momentum in the euro zone’s second-largest economy. The publication of these results coincided with a modest stock climb, as the CAC 40 index gained 23.85 basis points.

Analysts polled by Reuters had, on average, projected a 0.1% rise in GDP, with forecasts ranging from flat to as high as 0.3%, aligning closely with the official estimate.

Domestic Spending Stalls, Investment Softens

Private consumption, typically a key growth driver, failed to gain traction during the first three months of 2025. INSEE reported no change in household spending from the fourth quarter, as car purchases weakened following changes to a green subsidy policy. Meanwhile, business investment also lost ground, inching down 0.1%.

Negative Trade Balance Weighs on Activity

Foreign trade exerted downward pressure on output, subtracting 0.4 percentage points from GDP. As for imports, they rose by 0.4%. In contrast, exports contracted by 0.7%.

Stockpiling Lifts Output

The lone bright spot came from firms replenishing inventories, particularly in the chemicals, pharmaceuticals, and agri-food sectors. This inventory buildup contributed 0.5% to headline growth, partially offsetting the drag from weak demand and trade.

Policy Comments and Economic Outlook

French Finance Minister Eric Lombard maintained that the government’s full-year growth target of 0.7% remained achievable despite the slow start. Still, concerns over 2025 are mounting. Economist Sylvain Bersinger of consultancy Asteres warned that the outlook for 2025 had clearly darkened and become more uncertain as a result of Donald Trump’s trade war. “The government’s desire to limit the public deficit will also have an impact,” he added.