French economy unexpectedly contracts in Q3
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France's economy unexpectedly contracted in the third quarter, extending a year of stagnation amid political turmoil.
By the numbers: Europe's second-largest economy shrank 0.1% last quarter, after stagnating in the second quarter and contracting 0.2% in the first.
- The broader eurozone grew 0.4%, twice the rate economists expected.
- French inflation accelerated to 3.8% in October from 3.4% in September on an annual basis, driven by rising prices for energy and services.
Zoom in: France's 10-year government bond yield jumped as much as 0.1%, to about 4.98%, after the economic data before falling back.
- It remains below last week's peak of 5.14%, which was the highest in 24 years.
Between the lines: France risks a vicious cycle. Efforts to narrow its deficit could fuel further unrest, discouraging spending and investment.
- That would weaken growth and tax revenues, potentially forcing more unpopular cuts or tax increases.
The big picture: Protests that began over school staffing and conditions late in the third quarter likely had little impact on GDP. Household spending continued growing.
- Since then, demonstrations have spread nationwide over living costs and public services — with riots, looting and clashes with police.
The intrigue: European Central Bank president Christine Lagarde's early departure is fueling speculation about how involved she might become in the French presidential election at a critical juncture for her home country.
- "I want to have the freedom of speech, the freedom of expression, and the freedom to engage on matters that are not monetary policy matters," Lagarde wrote on X. (She has previously ruled out running for president.)
- Former central bankers Mario Draghi and Mark Carney both entered politics in their home countries (Italy and Canada, respectively) during periods of crisis.
