France‘s economy slowed in the first quarter, with trade showing only marginal growth (+0.1%), meaning the country ‘does not appear to be in tune with the rest of the continent’, according to statistics body Insee.
French exports fell by 1.8% in the quarter, due to volatility in the aeronautical and shipbuilding sectors.
‘Running out of steam’
During 2023 and 2024, France ‘held up somewhat better’ than other European countries, however, now, the economic drivers are ‘running out of stream’, as both public spending and investment are losing momentum.
In addition, French businesses have been hampered by a rise in financing costs between 2022 and 2024, reducing their ‘room to manoeuvre’, and leading to business confidence that remains below the historical average.
Compounding the situation is the fact that France has only recently begun its budget consolidation, unlike other European nations, further slowing domestic activity.
As Insee noted, GDP is expected to grow just 0.6% this year, down from 1.1% in 2024.
Elsewhere, despite France enjoying one of the lowest inflation rates in Europe – with inflation dropping to 0.7% in May 2025 – consumer spending continues to remain subdued.
As Insee noted, this ‘wait-and-see’ mentality among French consumers is driven by several factors.
‘In addition to uncertainties about economic policy, perceived inflation is still high, the automobile market is in transition, and the share of income from wealth in total income has risen sharply as a result of rate rises,’ it said.
Household savings
The household savings rate reached a 45-year high in France in early 2025 and is expected to stay elevated through much of the year. By the end of this year, savings may begin to decline, as disposable income dips due to higher income tax balances and a drop in returns on financial assets as interest rates ease.
‘On average over the year, [household] consumption is only expected to keep pace with purchasing power (+0.7%) and the savings ratio should remain stable, whereas it is expected to fall elsewhere in Europe,’ Insee said. Read more here.
