PARIS (Reuters) - French growth slowed slightly in the second quarter as consumer spending eased and companies drew down inventories, although economists expect income gains to help offset a weakening global outlook in the months to come.
The euro zone’s second-biggest economy grew 0.2% in the April-June period, down from 0.3% in the previous three months, according to preliminary data from the INSEE statistics agency.
That was just below a Reuters poll of 28 economists, which had an average estimate of 0.3%.
Until now the French economy has proven more resilient than some of its euro zone neighbors such as Germany because it is less dependent on exports and thus less exposed to the swings in the global economy.
“At this point there is no reason to stress about growth at these levels,” France’s State Secretary of the Economy Agnes Pannier Runacher told LCI television, pointing to strong business investment.
(Graphic: French GDP by contributions - tmsnrt.rs/2MqXhzs)
Household spending, the traditional motor of French growth, grew only 0.2%, the slowest rate in a year despite a more than 10 billion euro ($11.1 billion) package of measures launched by President Emmanuel Macron to boost purchasing power.
So far households have been largely saving income gains from the measures, largely made up of tax breaks - with a further 5 billion euros in income tax cuts due next year as well.
Meanwhile, businesses were undeterred by the weakening global economic outlook and nearly doubled their rate of investment to 1.2% after 0.7% in the first quarter.
“The support that investment lent the economy in the second quarter may not persist given global uncertainties,” Morgan Stanley economist Matthew Pennill wrote in a research note.
“But consumer spending is likely to recover in the coming months, given the prospect of further tax cuts ahead,” he added.
Exports grew 0.2% in the second quarter while imports were 0.1% higher, which meant foreign trade made no contribution to the overall growth rate.
While domestic demand added 0.4 percentage points to growth, companies running down their inventories rather than producing new goods knocked 0.2 percentage points off growth.
($1 = 0.8979 euros)
Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta, William Maclean