French Economy Cools as Olympic Boost Fades, But Consumer Spending Remains Solid

France's economic growth slowed in the fourth quarter of 2024 as the post-Olympics economic boost waned, according to preliminary data released by INSEE, the country's statistics agency, Reuters reports. However, strong consumer spending cushioned the slowdown, providing a glimmer of hope for domestic demand.

The eurozone's second-largest economy contracted by 0.1% in the last three months of 2024, following an unrevised 0.4% expansion in the third quarter. The Olympics had significantly boosted French growth in the third quarter, driven by increased sales of household services, tickets, and broadcasting rights.

Despite the cooling effect of the post-Olympics period, domestic demand remained a positive contributor to GDP in the fourth quarter. Consumer spending, traditionally the engine of French growth, rose by 0.4% in the quarter, although this represents a slight slowdown from the 0.6% increase in the previous three months.

Business investment also held steady, a positive sign after several quarters of contraction. This trend suggests that companies are cautiously optimistic about the future, even as the global economic landscape remains uncertain.

Foreign trade, however, continued to weigh on French economic activity in the fourth quarter. Exports declined, while imports rebounded, leading to a negative contribution from net exports. A decrease in corporate inventories also contributed to the slowdown in growth.

The 0.1% contraction in fourth-quarter GDP aligns with the median forecast of a Reuters poll of 30 economists, which predicted flat growth. For the full year, French GDP grew by 1.1%, matching the government's forecast and remaining unchanged from 2023.

The French government's 2025 budget plan is predicated on a forecast of 0.9% growth, but the outlook remains uncertain due to domestic political volatility and potential trade tensions with the United States. Several economists have expressed concerns about the 2025 outlook, citing the unpredictability of the US economy under President Donald Trump.

"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," said Societe Generale economist Fabien Bossy, in a research note cited by Reuters.

The resilience of French consumer spending despite the post-Olympics slowdown suggests some underlying strength in the domestic economy. However, the persistent weakness in foreign trade and the uncertainty surrounding the global economic outlook continue to cloud the horizon for French growth in the near term.