French Q2 GDP shrinks unexpectedly

France's economy unexpectedly shrank in the second quarter of 2016 as weak domestic demand offset the impact on GDP from a sharp drop in the country's imports.

Revised figures from INSEE revealed that gross domestic product fell by 0.1% quarter-on-quarter over the three months to June (consensus: 0.0%), albeit after surging by 0.7% in the previous three months.

In comparison to a year ago, GDP slowed a fraction, from the 1.4% pace observed in the first three months of 2016 to 1.3%.

"These are grim data, but the upshot is that the worst of the inventory correction likely is past, and we don’t expect a major drag in the second half of the year. In addition, growth in consumers’ spending also was revised down slightly, and is now estimated to have declined slightly in Q2," said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.

Internal demand was flat in terms of quarterly rates of change, as inventories fell by 0.7% and household consumption dipped 0.1%. Net imports on the other hand rose sharply, by 0.6%, but mainly as result of a 1.8% drop in imports.