France GDP Growth Beats Expectations

France's economy posted a faster-than-expected growth in the second quarter on investment and exports, the first estimate from the statistical office INSEE showed on Tuesday.

Gross domestic product expanded 0.3 percent sequentially, beating expectations for a growth of 0.2 percent. The rate matched the 0.3 percent growth logged in the first quarter, which was revised up from 0.2 percent.

The expenditure-side of GDP showed that final domestic demand made a positive contribution to GDP growth due to the slight rebound in gross fixed capital formation.

Gross fixed capital formation edged up 0.1 percent, reversing a 0.4 percent fall in the first quarter. At the same time, household consumption remained unchanged after a 0.1 percent drop in the preceding period.

The quarterly growth in government expenditure halved to 0.3 percent from 0.6 percent in the prior period.

Foreign trade also made a positive contribution of 0.2 points to the growth as imports remained flat, while exports logged a dynamic 0.6 percent expansion. Finally, changes in inventories made no contribution to GDP growth again this quarter.

Another data from the statistical office showed that household spending decreased in June due to lower energy and food consumption. Household spending fell 0.5 percent, in contrast to the 0.8 percent increase in May. Consumption was forecast to drop 0.4 percent.

Earlier in a note, the statistical office INSEE said the impact of the Paris Olympic and Paralympic Games on economic activity is expected to be around 0.3 GDP points in the third quarter.

Some of these positive effects have already been seen, especially in the construction sector, the INSEE noted. As the support is likely to be non-recurring, a sharp slowdown in activity is expected in the fourth quarter. The country is currently undergoing a political impasse after a snap parliamentary election. Earlier this year, the government downgraded France's growth outlook to 1.0 percent from 1.4 percent.

The International Monetary Fund forecast France's economy to grow 0.9 percent this year and 1.3 percent in 2025.

Elsewhere, Spain GDP expanded 0.8 percent in the third quarter. Second quarter GDP data is also due from Germany and Italy.