The French economy contracted slightly in the fourth quarter of 2024 (minus 0.1 percent), marking a slowdown after the 0.4 percent growth in the third quarter, which the Paris Olympic and Paralympic Games had buoyed. The post-event economic cooldown, typical after large-scale international events, underscores the transient nature of such economic boosts.

Household consumption remained resilient (0.4 percent), though it decelerated from third-quarter levels, reflecting cautious spending patterns. Investment activity remained weak, with gross fixed capital formation stabilising (minus 0.1 percent), suggesting businesses exercised restraint amid economic uncertainties.

Trade dynamics continued to weigh on growth, with exports declining (minus 0.2 percent) while imports rebounded (0.4 percent), resulting in a negative foreign trade contribution (minus 0.2 points). This indicates a softening of external demand and increased reliance on imports, possibly driven by restocking ahead of regulatory or market shifts.

Overall, the fourth quarter's contraction reflects a recalibration following an event-driven surge, highlighting the importance of sustainable economic policies beyond one-off global events, taking the RPI to 0 and the RPI-P to 0. This means that economic activities are generally in line with market expectations in France.

The consensus sees a stagnant no change in GDP in Q4 from Q3.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The flash estimate, released a relatively short 4-5 weeks after the end of the reference quarter, is an effort to speed up delivery of key economic data. In contrast to most European flash releases, the French version provides an early look at the GDP expenditure components.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market Investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report contains information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. These data, which follow the international classification system (SNA93), are readily comparable to other industrialized countries. GDP components such as consumer spending, business and residential investment illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.

Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anaemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower. Currency traders prefer healthy growth and higher interest rates. Both lead to increased demand for a local currency. However, inflationary pressures put pressure on a currency regardless of growth.