French economy stalls as inflation rises to 2.4%

France's economy recorded no growth in the second quarter, statistics office Insee said on August 28, revising down its earlier estimate as inflation rose in August.

Insee said gross domestic product was flat in the quarter, instead of the 0.2 percent growth it first reported last month. It also revised first-quarter GDP to a 0.2 percent decline, compared with a previous estimate of a 0.1 percent fall.

“These revisions reflect the even more deteriorated state of agricultural production compared with the information available at the end of July,” Insee said.

Finance Minister Roland Lescure said an early summer heatwave in June took a heavy toll on farmers. “Harvests are likely to be very tough for certain products, and in certain regions... the impact is absolutely horrific, enormous,” he told a business conference in Paris.

Inflation in France rose to 2.4 percent in August from 2.1 percent in July, Insee said. Household purchasing power fell 0.5 percent in the second quarter after slipping 0.1 percent in the first.

The figures add pressure on the French government as it seeks spending cuts for the 2027 budget. The budget deficit stood at 5.1 percent of GDP last year, above the eurozone limit of 3 percent.

Charlotte de Montpellier, an economist at ING, said the figures suggested the French economy came “very close to a technical recession” in the first half of the year. She said the government's forecast for 0.7 percent GDP growth this year was “now out of reach”, predicting 0.5 percent growth with downside risks.