French Economy Rebounds With 0.2% Growth in Second Quarter

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(Bloomberg) — France’s economy returned to growth in the second quarter, avoiding a recession as domestic demand picked up and exports rebounded.

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Gross domestic product rose 0.2% after falling 0.1% in the first three months of 2026, statistics agency Insee said Thursday. That’s in line with the median estimate of analysts surveyed by Bloomberg.

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The rebound in the euro zone’s second-biggest economy augurs well for the region as a whole on a day where Germany, Italy and Spain are all also expected to report growth, defying the disruption and uncertainty wrought by the conflict in the Middle East.

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While surges in oil prices have driven up inflation, weighed on household budgets and curbed investment, Europe has largely weathered the fallout from Donald Trump’s war with Iran. The 20-nation currency bloc avoided a contraction in the first quarter and is expected to reveal expansion of 0.2% in the second at 11 a.m. Paris time.

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Recent indicators point to further improvement, even as fighting clouds the peace process between Washington and Tehran. Businesses proved more optimistic than anticipated in Germany and France in July.

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The full effect of the initial energy shock “has yet to play out,” however, according to the European Central Bank. While it held interest rates steady this month, it warned of upside risks to inflation and downside risks to growth. Some officials are inclined to add to June’s hike and investors are anticipating another move in September.

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Data due Friday are set to show consumer-price gains quickened slightly in July from June’s 2.8%. Slovak central-bank Governor Peter Kazimir said this week that the ECB will have to raise borrowing costs at least once more to ensure inflation risks don’t spin out of control.

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In France, inflation and economic frailty have forced the government to cut this year’s forecasts and admit that the goal to narrow a hefty fiscal deficit has become “difficult.”

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Firms and households face more uncertainty in the months ahead as a fractured parliament reconvenes to negotiate a budget to tackle the country’s ballooning debt. The process, which has toppled governments in recent years, is now even more precarious as parties maneuver before presidential elections next spring. 

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Thursday’s GDP reading showed consumer spending rose 0.2% after a 0.3% fall in the first three months of the year. Still, investment shrank for a second consecutive quarter with a 0.3% decline. Trade made a positive contribution to GDP as the rebound in exports outpaced growth in imports.  

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A separate monthly measure of French consumer spending showed a 0.4% increase in June. That contrasts with a 0.1% contraction forecast by economists.

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—With assistance from Joel Rinneby, Harumi Ichikura, Giovanna Coi, Mark Schroers and Fabrice Obrist.

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