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Flash July GDP and June Consumer Spending Remain Robust

FRANCE DATA
MNI (London)
  • French GDP came in stronger than anticipated for Q2, expanding 0.5% q/q (vs +0.2% forecast) and by 4.2% y/y (vs +3.7% forecast). This is a solid beat of the -0.2% q/q contraction seen in Q1, and only modestly slower than the strong +4.5% y/y growth of Q1.
  • Stronger foreign trade was a key upwards growth driver, adding 0.4-points to the headline expansion and boosted by strong service exports and declining imports. The decline in household consumption was also significantly softer in Q2.
  • Consumer spending remained robust in June, expanding by a modest 0.2% m/m, significantly outpacing the forecast of a -0.9% m/m contraction. The year-on-year contraction was 0.2pp softer than anticipated at -4.4% y/y (vs -3.4% y/y in May).
  • The June report highlighted that a sharp rebound in energy consumption accounted for the growth in consumer spending, whilst consumption of manufactured and food goods both decreased. As such, the growth in spending is unlikely to translate into stronger underlying demand.
  • French HICP is due at 0745 BST, which is seen accelerating further to +6.7% y/y. This coupled with a robust Q2 GDP print will likely add confidence to more hawkish ECB intentions going forward.

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