The legacy of the Olympic and Paralympic Games has a lasting impact beyond just sports facilities and urban developments; it will also be reflected in economic growth figures. The Olympics are expected to have given the French economy its best quarter of the year, with gross domestic product (GDP) up by 0.4%, according to the first estimate published by the national statistics institute INSEE on Wednesday, October 30. In both the first and second quarters, growth was recorded at 0.2%. All in all, the French economy should close in 2024 with a modest growth of 1.1%, in line with budget assumptions. INSEE expects the last three months of the year to be sluggish.
Without the Olympic Games, the picture would be even gloomier. “Apart from the Games effect, we have an economy that is fairly sluggish, growing in the third quarter at a rate of 0.1% to 0.2%,” said Nicolas Carnot, director of economic studies and syntheses at INSEE. “Manufacturing production remains at a standstill, business investment is still poorly oriented, the automotive sector remains in a difficult patch…” As has been the case since the beginning of the year, it is public demand – spending by public authorities, hospitals and other institutions – that is driving economic activity in France, while the private sector is lagging behind.
Foreign trade has positively affected French growth in recent quarters, although not for the best of reasons. Imports fell more than exports over the summer, indicating that manufacturers and consumers have been reducing their spending. Business investment, in particular, fell sharply (-0.8%) in the third quarter.
Food consumption is back in positive territory
The only piece of good news is that consumption has been less sluggish. Households increased their spending by 0.5% between July and September. Here again, the Olympic Games effect accounted for half of this increase. INSEE said that French consumers treated themselves to “recreational services” linked to the Games, including subscriptions to television platforms and other information and communication services. Additionally, the back-to-school period and a drop in temperature contributed to this rise, with spending on textiles and clothing seeing a slight uptick. Another positive sign is that food consumption, which had been in decline for several quarters, has returned to positive growth.
Is the recent increase in consumer spending here to stay? The government is certainly counting on it. Economy and Finance Minister Antoine Armand is banking on the fact that households will be spending more and supporting growth in 2025. However, other factors are working against this scenario, pointed out Stéphane Colliac, an economist at BNP Paribas. The prices of many essential services, such as medical consultations, as well as home, car and supplementary health insurance, are expected to rise in the coming months. Additionally, taxpayers may choose to be cautious in anticipation of potential tax increases.
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