INSEE cuts French Q2 growth to zero after a weak harvest

France's statistics office, INSEE, revised second-quarter GDP growth to zero on Friday, 28 August. The first estimate, published at the end of July, had been plus 0.2 percent. The first quarter was cut again, from a 0.1 percent contraction to 0.2 percent. Two down quarters in a row, even with the second one flat rather than negative, leave the government's 0.7 percent full-year growth target almost out of reach.

INSEE said the revision came from two late inputs. Agricultural output looked worse than the July snapshot. Prices for market services came in stronger than expected, which changed the volume arithmetic. Finance minister Roland Lescure did not hide behind the technical language. He called the downgrade "the first impact of the horrible summer that we had," a stretch of heatwaves, drought and wildfires.

The pieces that moved

Household consumption rose 0.3 percent in the second quarter after a 0.3 percent drop in the first. Government consumption rose 0.4 percent, a touch faster than the first quarter's 0.3. Exports jumped 2.9 percent after a 3.0 percent fall, helped by aircraft. Imports rose 1.1 percent after a 0.6 percent decline. Foreign trade therefore added 0.6 percentage points to GDP after subtracting 0.9 points in the first quarter.

That trade rebound was not enough to print a positive headline once agriculture and the services deflator were updated. Inventories had already been a drag in the first estimate. The euro zone's second-largest economy is now booked as flat for April to June.

What the target requires

INSEE's own arithmetic says France would need 0.5 percent growth in both the third and fourth quarters to hit 0.7 percent for 2026. Lescure told an economics conference that the finance ministry will have to assume a weak third quarter when it updates growth and deficit figures in September, before the 2027 budget bill in early October. The deficit target for this year is 5.0 percent of output, against 5.1 percent last year. Softer growth makes that cut harder without extra measures.

Household consumption is still the engine France counts on. It did restart in the second quarter, led by food, energy and manufactured goods. That restart now sits under a harvest that INSEE itself marked down. If autumn demand holds and aircraft exports stay firm, a late-year bounce is possible. If the third quarter prints near zero again, the 0.7 percent forecast will be retired in the September update and the deficit conversation will move with it.

The political calendar is unkind to a flat print. A budget bill in October that starts from a weaker growth base has less room for spending promises and more need for receipts. Lescure has already said the summer will be written into the numbers. Friday's revision is that writing.