France: Weak GDP growth in Q1; low inflation in April

French GDP growth increased by + 0.1 3 % Q/Q in the 1 st quarter (see chart 1) according to the Insee flash estimate, close to our expectations ( +0. 16 %), after - 0. 1 % in Q 4 . However, the composition is weak. For 2025, we expect French GDP to grow by +0.6% with GDP to grow by around +0.15% by quarter. Weak GDP growth in Q1 with positive contribution from inventories The final domestic demand remained stable. Household consumption was unchanged in Q1, with a sharp negative contribution from transport equipment consumption (-4.4% after +2.6%) . According to the Insee, this was led by the reduction in the ecological bonus for electric or hydrogen-powered vehicles at the end of 2024. However, h ousehold consumption of services was strong (+0.5% after -0.1%) . Public consumption decelerate d (+0.1% from +0.4%). Investment was down in Q1 (-0. 2 % Q/Q ) with negative contributions from the non-financial corporations (-0.1% Q / Q ), households ( -0.3% Q / Q t ) and general government (-0.3% Q/Q) . By sector, Investment in construction continued to fall this quarter (-0.8% Q/Q after -0.9% in Q4 ) while investment for transport equipment remained strong (+1.3% after +1.4%). The contribution of foreign trade to GDP growth remained negative in Q1 2025 (-0.4 pp after -0.1 pp in Q4) with a plunge in exports (-0.7%, with sharp drop in the chemicals and automotive industries) and a rebound in imports (+0.4%), notably in the “other manufacturing industry” ( metallurgy , pharmaceuticals and jewellery according to the Insee ) . The only positive contribution came from the change in inventories (+0.5 pp ) , coming from chemicals, pharmaceuticals and food products. We believe that the increase in imports and in change in inventories this quarter may be partly related to fears of tariffs and potential retaliatory measures, as well as precautionary stockpiling, especially considering that pharmaceuticals and chemicals are key sectors of trade between France and the United States. Inflation to remain low in 2025 French Flash April inflation came in at +0.8% Y/Y for both CPI and HICP ( Chart 2, Consensus, Natixis: +0.7% ) . Services inflation remained stable at 2.3% Y/Y as manufactured goods inflation (-0.2% Y/Y). Food prices increased by 1.2% Y/Y from 0.6% Y/Y in March. Energy prices were down by -7.9% Y/Y. On average, w e expect French inflation to remain below 1% in 2025.