Economy: The French GDP Shows Moderate Growth Despite the Real Estate Crisis

The French economy shows resilience in the second quarter of 2024, with GDP growth of 0.3% according to Insee. This performance, better than expected, comes in a context of marked slowdown in the real estate sector.

Growth Driven by Exports

The 0.3% GDP increase in Q2 2024 exceeds economists’ expectations. This rate, identical to that of the previous quarter, indicates a relative stability of economic activity in the face of current challenges.

Foreign trade turned out to be the main driver of this growth, with a positive contribution of 0.2 percentage points. Exports particularly benefited from the delivery of a significant vessel, highlighting the competitiveness of the French industry in certain cutting-edge sectors.

Business investment saw a slight rebound (+0.1%), driven by the dynamism of the tertiary sector. This recovery, although modest, marks a break with two consecutive quarters of contraction. 

Household consumption remained sluggish, with a decline in food purchases offset by an increase in energy and services spending.

However, real estate remains a weak point. Residential investment fell by 0.5%, mainly in new housing, reflecting the structural difficulties of the housing market.

The Olympic Paradox Amidst the Real Estate Crisis

The contrast is striking between the slight GDP growth and the collapse of the French real estate market. With a 22.6% drop in transactions in one year and a widespread depreciation of assets, the sector is experiencing its worst crisis in decades.

Paradoxically, the Paris 2024 Olympics could offer a temporary respite to the French economy. According to projections from the Center for Law and Economics of Sport (CDES) in Limoges, the event could generate between 5.3 and 10.7 billion euros in economic benefits for the Île-de-France region alone over the 16-year span.

This Olympic windfall could partially offset the losses of the real estate sector, estimated at several billion euros. However, the positive effect of the Games is likely to be short-lived in the face of a structural housing crisis.

French growth in the second quarter of 2024 reveals a two-speed economy. On one side, unexpected resilience driven by exports and business investments. On the other, a real estate sector in complete disarray threatening the recovery. The impact of the Olympics will be crucial in maintaining this fragile economic growth in the coming months.