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In the first quarter, the French economy surpassed expectations by expanding slightly faster than forecasted. The growth was driven by increased domestic consumption and investment, setting the stage for the broader eurozone to start pulling out of its recent stagnation.
French gross domestic product grew by 0.2 percent in the first three months of the year, exceeding economists’ predictions based on data from the previous quarter. This positive news led to a 0.2 percent increase in the euro against the dollar, marking a continued rally for the currency ahead of the US Federal Reserve meeting on interest rates.
Forecasts suggest that eurozone growth will see a modest uptick this year, fueled by slowing inflation and rising wages, which will in turn boost household spending power. Anticipation of a potential summer interest rate cut by the European Central Bank has prompted banks to lower borrowing costs, further supporting domestic consumption.
Recent data released from France and Germany show an increase in consumer spending towards the end of the first quarter. French retail sales rose by 0.4 percent in March, while German sales saw a significant 1.8 percent increase. However, concerns remain over France’s efforts to reduce its budget deficit on the economy in coming months.
Despite these challenges, positive results were reported by French statistics office in household spending and investment in Q1; government spending also increased significantly during this period.
Analysts caution that a potential tax increase to address budget deficits could dampen consumer sentiment and slow down spending in near future
