The slight 0.1 percent decline in GDP in the fourth quarter of 2024 signals a cooling economy, following a strong third quarter boosted by the Paris Olympics. While household consumption remained positive (0.3 percent), the drop in services consumption (minus 0.1 percent) suggests weakened demand in discretionary spending. Meanwhile, fixed investment remained sluggish (minus 0.1 percent), dragged down by a 1.0 percent fall in construction activity, although transport equipment investment rebounded.

Despite stagnant household purchasing power (0.0 percent), annual figures reveal a 2.5 percent rise in 2024, driven by higher wages and pension adjustments. However, a slight decline in savings (18.4 percent) suggests households are dipping into reserves to maintain consumption. On the corporate side, profit margins for non-financial companies fell slightly to 32.2 percent, reflecting higher real wages and stable consumer prices, reducing business profitability. Meanwhile, exports rebounded (0.4 percent), particularly in industrial goods and chemicals, offset by rising energy imports, leaving trade's GDP contribution neutral.

Overall, the fourth quarter's slowdown appears temporary, shaped by post-Olympics adjustments and investment declines. However, stable wages, resilient exports, and moderate inflation suggest the economy retains underlying strengththough sustaining growth in 2025 may require more substantial investment and consumer confidence. This latest update leaves the RPI at minus 14 and the RPI-P at minus 10. This means that economic activities are slightly behind market expectations of the French economy.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. Following the release of the flash estimate about four weeks earlier, the second report incorporates additional data to provide a more accurate reading. This is also revised in the final report, published in the third month after the reference quarter.

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 anemic 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.