French Economy Rebounded in Second Quarter Despite War Uncertainty — Update

By Don Nico Forbes and Ed Frankl

France's economy picked up in the second quarter, helped by a rebound in household spending and robust exports, overcoming some of the uncertainty about the course and consequences of the conflict in the Middle East.

Gross domestic product in the eurozone's second-largest economy rose 0.2% in the three months through June, France's statistics agency said Thursday. That compares with a 0.1% contraction in the first quarter and came in above the 0.1% growth expected in a consensus of economists polled by The Wall Street Journal.

Despite continued supply-chain disruptions and higher energy prices, driven by the U.S. and Israeli war on Iran, the economy has proved more resilient than many economists had feared following the outbreak of conflict earlier this year.

Still, the energy crisis comes as the latest setback for the economy, which has struggled to gain momentum in recent years. Repeated economic shocks, from Russia's invasion of Ukraine to President Trump's tariff war, have left consumer sentiment near historic lows.

The impact of wildfires in southern France, which have hit key agricultural, manufacturing and wine-growing areas near Bordeaux, now compounds those concerns.

France's finance minister, Roland Lescure, this week said the fires were an "economic thunderbolt" striking the affected region.

"The wildfires affecting parts of southern Europe are a stark reminder that climate change is reshaping economic as well as environmental risk...the effects are increasingly felt through disruptions to production, tourism flows, transport, and supply chain bottlenecks," said Daniel Parker, senior economist at Oxford Economics.

Growth in the 21-nation eurozone remains on shaky ground. While Middle East tensions calmed in June, a breakdown in negotiations and escalation of attacks in the Persian Gulf this month threaten to weigh further on the economy ahead.

The European Central Bank last month cut its expectations for growth this year and next amid a hit to real incomes and confidence from the war. An expected pickup in growth in the second quarter suggests the economy may be holding up better than the central bank feared, although it warned last week that growth could be weaker and inflation is likely to be higher if the conflict drags on.

The ECB voted unanimously to hold interest rates at 2.25% last week, following a hike in June. While the central bank moved faster than the Federal Reserve or the Bank of England to tame inflation, it has noted little evidence so far of second-round price effects stemming from the energy crisis.

On Wednesday, the ECB's wage tracker continued to anticipate slower pay growth this year due to weak near-term growth momentum, depressed confidence and high uncertainty.

While most investors expect the ECB to raise its key interest rate for a second time since the conflict began when policymakers meet in September, economists have warned that further monetary tightening could weigh on an already fragile economic outlook.

Write to Don Nico Forbes at don.forbes@wsj.com and Ed Frankl at edward.frankl@wsj.com

(END) Dow Jones Newswires

July 30, 2026 02:23 ET (06:23 GMT)