France Is Set to Grow 0.4 Percent This Year and Be the Only Major Economy Slowing Significantly
The French economy will grow 0.4 percent in 2026, 3 times less than its euro area neighbours and the United Kingdom, and France is expected to be the only major advanced economy where activity slows significantly this year, according to the September outlook published by the national statistics institute on 10 September. Output fell 0.2 percent in the first quarter and was flat in the second, and is forecast to manage 0.1 percent in the third and 0.2 percent in the fourth.
| Period | Growth |
|---|---|
| First quarter, outturn | -0.2% |
| Second quarter, outturn | 0.0% |
| Third quarter, forecast | 0.1% |
| Fourth quarter, forecast | 0.2% |
| Year 2026, forecast | 0.4% |
Quarter on quarter rates. The institute states the annual rate for France but not for the euro area or the United Kingdom.
4 reasons France is behind
The institute names 4. Civil engineering is in a sharp downturn tied to the municipal electoral cycle. The summer heatwaves hit France harder than its neighbours, particularly in agriculture, at an estimated cost of 0.1 points of annual growth. The labour market is in worse shape, with rising unemployment and sluggish wages. And the fiscal impulse is less favourable than next door.
The contrast is with neighbours holding a steadier pace: activity rose 0.3 percent in the spring across the 4 largest euro area economies taken together, and 0.4 percent in the United Kingdom after 0.6 percent. The United States is holding a pace of around 2 percent a year on the strength of private investment in new technologies.
Inflation rising, jobs falling
Inflation reached 2.4 percent in France in August and is forecast to reach 2.9 percent by the end of the year, as gas prices surge and energy feeds through into manufactured goods and some services, notably transport. The end of the telecommunications price war and a temporary spike in fresh vegetable prices after heatwave losses add to it. Even so France is expected to stay below the rest of Europe, where euro area inflation ran at 3.3 percent in August, because French wages and service prices are much less dynamic. Wage negotiations, the institute says, should only just suffice to offset price rises this year.
The labour market gives way. France is projected to shed 52,000 payroll jobs this year after 48,000 last year, while creating 95,000 non payroll jobs after 90,000, a net gain of 43,000 on our calculation that is not enough to absorb a growing labour force. Unemployment is forecast to climb to 8.6 percent by the end of the year. Household purchasing power falls 0.4 percent over the year, and households are expected to dip into savings to hold consumption up 0.3 percent.
| Measure | 2026 | 2025 |
|---|---|---|
| Payroll jobs | -52,000 | -48,000 |
| Non payroll jobs | +95,000 | +90,000 |
| Corporate investment | -0.3% | +0.7% |
| Household investment | -1.3% | +0.1% |
Forecasts for 2026. Corporate investment fell 0.3 percent in 2024 and household investment fell 10.0 percent. The institute’s English narrative gives corporate investment as a fall of 0.2 percent in 2026 after a fall of 1.1 percent in 2024; its French narrative and the statistical annex in both languages give 0.3 percent for both years, and 1.1 percent is the 2024 figure for total fixed investment. The annex is used here.
Why it matters: For the euro area, France is now the drag rather than the ballast, and the gap with the other large euro area economies is wide enough that it changes the bloc’s arithmetic. On our reading the uncomfortable part is the composition: with corporate and household investment both negative and civil engineering falling on the municipal electoral cycle, only external trade is expected to support growth, which leaves the recovery dependent on aeronautics and shipbuilding rather than on domestic demand.
Outlook: The institute flags its own uncertainties. The effect of the heatwave on third quarter activity is not yet fully known. The outlook assumes no substantial damage beyond agriculture and civil engineering, which the institute concedes may prove wrong given the scale of the 2026 heatwaves. Its oil assumption is a barrel back around 90 dollars. The outlook was published in French on 10 September and in English on 18 September, under separate page identifiers and with separate publication dates.
Sources: INSEE.
