France’s preliminary GDP increased by 0.3%, but domestic demand stayed flat due to a decline in trade.
by VT Markets
/
Jul 30, 2025
France’s GDP for the second quarter of 2025 saw a 0.3% increase, surpassing the expected 0.1% growth. INSEE’s latest data highlights what drove this GDP change.
Domestic demand stayed the same during this quarter, while foreign trade dipped by 0.2%. However, a 0.5% rise in inventory changes balanced this out. Domestic demand has struggled in the first half of 2025, dropping by 0.1% in the first quarter.
Underlying Weakness in the French Economy
The positive GDP figure for the second quarter disguises some serious issues. The growth was mainly due to businesses increasing unsold inventory, not from real consumer spending or trade. This suggests weaknesses that could indicate a slowdown in the future.
This weak domestic demand reflects other recent data from summer 2025. The latest S&P Global Flash PMI for July revealed a contraction in France’s private sector, with the index dropping to 48.5. Meanwhile, inflation in France remains stubborn at 2.8%, significantly above the ECB’s target, making households cautious about spending.
For traders, this underlying weakness paints a bearish outlook for French stocks. It’s worth considering buying put options on the CAC 40 index, as a market correction may follow once investors look beyond the headlines. The initial positive reaction could create a better opportunity to buy these positions in the weeks ahead.
Impact on the Euro
This situation also negatively affects the euro. As the Eurozone’s second-largest economy struggles, it puts pressure on the currency. A similar scenario occurred during the 2011-2012 sovereign debt crisis when weaknesses in major member states heavily impacted the EUR/USD exchange rate.
The conflicting data—a positive headline paired with concerning details—creates market uncertainty. This could lead to increased volatility in European markets. We might want to consider buying call options on the VSTOXX index, which tracks Euro Stoxx 50 volatility, to take advantage of expected market fluctuations.
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by VT Markets
Jul 30, 2025
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