French economy bounces back in Q2 but overall momentum remains sluggish

The French economy is estimated to have rebounded in Q2, helped mostly by a modest recovery in domestic demand conditions. Overall, domestic demand (excluding inventories) contributed +0.1% to GDP growth, after -0.2% in Q1 2026. This comes as household consumption picked up in Q2 (+0.2%) after the slump in Q1 (-0.3%). Meanwhile, the contribution of foreign trade to growth was also positive (+0.6%) compared to the previous quarter (-0.8%) but offset by the negative contribution from changes in inventories (-0.6%) compared to the previous quarter (+0.9%). Overall, it still points to a more sluggish momentum in the French economy despite an improvement in the quarterly estimate compared to Q1. The running rate of 2026 GDP is now at +0.5% and that's markedly softer than what we saw in the whole of 2025 of +0.9%. In particular, domestic demand (+0.2%) is the one being much softer this year compared to last year (+0.5%). Still, the worry now for the second half of the year will be from the continued negative impact due to the Middle East conflict. Alongside higher energy prices again, it will be a question of whether demand conditions can hold up amid tighter monetary policy and potentially higher price pressures to follow as well.