French Economy Surpasses Q2 Growth Predictions, Fueled by Consumer Spending and Inventory Increases

The French economy recorded stronger-than-expected growth in the second quarter of 2025, according to official data released by the national statistics office (INSEE). France’s GDP rose by 0.3% during the period, surpassing analysts’ forecasts of just 0.1% growth, as an uptick in household spending and a sharp rise in inventories supported the recovery.

This performance marks an improvement from the first quarter’s modest 0.1% growth. INSEE noted that the second-quarter expansion was driven entirely by a build-up in inventories, while foreign trade actually dragged on the overall figure. Domestic demand contributed nothing to the growth, highlighting underlying structural challenges.

Although household consumption increased slightly by 0.1%—rebounding from a 0.3% decline in Q1—business investment shrank by 0.4%, pointing to ongoing weakness in private sector confidence.

In a more optimistic sign, separate data released by INSEE showed that consumer spending in June rose by 0.6% on a monthly basis, defying expectations of a contraction and offering a glimmer of hope for a more sustained rebound in the coming months.

Despite this, France—the eurozone’s second-largest economy—continues to face fiscal and political headwinds. The country is grappling with slow overall growth and mounting budget deficits. Prime Minister François Bayrou has pledged to reduce the public deficit from 5.4% of GDP this year to 4.6% by 2026, with the goal of meeting the EU’s fiscal deficit ceiling of 3% by 2029.

The economic outlook is further complicated by broader eurozone stagnation. While Spain posted a solid 0.7% growth rate in the same quarter, the euro area as a whole is expected to report flat or negative GDP data later today.

Externally, a preliminary trade agreement reached earlier this week between the European Union and the United States could provide some predictability to help support economic activity. However, concerns remain over its terms, particularly a U.S. tariff of 15% on selected EU goods, which has drawn criticism from European businesses and officials.

Domestically, France is also navigating political turbulence following the collapse of the previous government at the end of 2024, which left the country without an approved budget for several months. Although the new administration managed to pass fiscal legislation in February, it lacks a parliamentary majority, raising the risk of political gridlock if upcoming austerity measures are rejected in the autumn.

In this context of uncertainty—both political and economic—the outlook for France hinges on the government’s ability to push through structural reforms, rebuild business confidence, and manage external pressures in a volatile global environment.