French Third Quarter GDP Posts Weaker Than Expected Growth

France’s economy is growing again, but not by as much as economists hoped. The French GDP increased by 0.2% in the third quarter of this year, though lesser than economists forecast of 0.3% The July 14 terror attack in Nice was a major blow for the country's tourism industry, just ahead of what is usually peak season, declining business investment and a drag on tourism from terror attacks.

France’s finance minister, Michel Sapin, has admitted that the government may miss its growth targets this year which is 1.5%, after this morning’s GDP figures missed expectations. Natixis economist Philippe Waechter also said a 1.4 percent rise in GDP in the fourth quarter would be needed to meet the 2016 target. "That'd be a bit strong, I think," he said.

Investment spending increased 0.3% for the quarter after being unchanged previously, although capital spending for non-financial corporations contracted for the second successive quarter with notable weakness within the manufacturing sector.

Household consumption expenditure was unchanged for the quarter for the second time running, while there was a 0.4% increase in government spending for the third quarter running. French consumers-the main pillar of economic growth in the country-were hesitant in the third quarter, National Institute of Statistics And Economic Studies data indicates.

The weak growth is a further setback for embattled President François Hollande, who has pinned his political future to an economic upturn driving down unemployment. The Socialist leader says he will decide by the end of the year whether he'll seek re-election in May 2017 and won't do so if unemployment isn't on a downward path.

Recent figures for jobless claims over the summer have been volatile, indicating there will be no clear picture of France's economic health before Mr. Hollande's self-imposed deadline for deciding whether to run in the elections.

Bloomberg economist Maxime Sbaihi says France +0.2% GDP growth in 3Q means ±1.2% overall growth rate for 2016, same as 2015.The problem being that the French pace not fast enough to lower unemployment.

Holger Sandte of Nordea Market also said France GDP is still sluggish, 0.23 q/q in Q3, no consumption growth for the second quarter in a row, possibly still paying back from strong Q1.

Barclays economist Francois Cabau called the rebound "uninspiring", saying

"As for 2017, we remain of the view that political risks in the country and abroad are likely to deter confidence, and thus growth, particularly hitting investment and stock building".