The French economy is facing a slowdown, with the National Institute of Statistics and Economic Studies (Insee) significantly reducing its growth forecast for 2026 to 0.4%, down from 0.7% previously. This revision reflects a broader economic decline, marked by weakening household consumption, declining investment, and signs of weakness in the labor market. According to Insee, France experienced a 0.2% contraction in GDP during the first quarter of the year, and economic activity stagnated in the second quarter. This downward adjustment highlights a more substantial slowdown than a mere statistical fluctuation. Compared to its European neighbors, France is lagging behind. Germany recorded two quarters of growth, at 0.4% and 0.3%, while Italy advanced by 0.3% and 0.2%, and Spain grew by 0.6% and 0.7%. The United Kingdom also maintained a relatively stable economic activity, with 0.6% and 0.4% growth in the first and second quarters. France's weakness is particularly evident in domestic demand, as household consumption remains weak and public investment has declined, especially due to the electoral cycle. Public spending is also progressing more slowly than in some neighboring countries, stalling the main drivers of domestic demand, according to Insee. The labor market is showing signs of decline, with rising unemployment and less dynamic wage growth reducing the support provided by incomes to consumption. Business investment is expected to decrease by 0.3% this year, while household investment would decline by 1.3%. The French economy has also been affected by extreme climate events, including heatwaves and droughts, which have particularly impacted agriculture more than in other major European economies. Insee estimates that these events have reduced annual growth by 0.1 percentage points. Growth statistics have been revised downward after incorporating more degraded agricultural data than expected. Harvests are expected to be extremely difficult in several sectors and regions, according to the Minister of Economy, Roland Lescure. The impact of the extreme summer weather must now be factored into economic and budgetary projections. The minister described the downward revision of growth as the first concrete impact of the harsh summer. However, the damage is not limited to agriculture. High temperatures have disrupted outdoor activities and slowed public works, with Insee noting a sharp decline in this sector. Public finances are also a constraint, with a high deficit limiting the government's ability to support economic activity through spending. Insee anticipates a less favorable budgetary impulse, requiring the government to manage a delicate balance between containing deficits and avoiding further economic slowdown. Despite these challenges, Insee expects a gradual improvement in the second half of the year, with growth reaching 0.1% in the third quarter and 0.2% in the fourth. The end of the main direct effects of the heat episodes, especially on public works, should allow economic activity to regain some momentum. The business climate has also improved after the disruptions linked to geopolitical tensions. However, this rebound would remain insufficient to erase the backlog accumulated since the beginning of the year, with French growth in 2026 expected to be three times lower than that of eurozone neighbors or the United Kingdom. Furthermore, the improvement in economic activity would not immediately translate into better living standards. Household purchasing power is expected to decrease by 0.4% in 2026, partly due to the decline in salaried employment and higher-than-expected inflation, which is projected to reach 2.9% by the end of the year. This is especially due to a temporary increase in food prices, with Insee noting a short-term impact from heatwaves on fresh vegetable prices. Consumption would thus only increase by 0.3% for the year, with households needing to rely more on savings, as the savings rate would decrease from 17.8% of gross income in 2025 to 17.3% in 2026.