Flat French growth in the second quarter puts outlook at risk

The downgrade puts the government's full-year growth forecast of 0.7% all but out of reach as the economy would need to grow 0.5% in both the third and fourth quarters to reach it, according to INSEE.

Weaker-than-expected growth in turn raises the risk that the government will not be able to cut its fiscal deficit to 5.0% of economic output as planned this year from 5.1% last year.

Lescure told an economics conference that his ministry would need to factor in a likely weak third quarter when it updated France's growth and deficit forecasts in September before presenting the 2027 budget bill in early October.

Separately, INSEE said that inflation accelerated to a three-month high of 2.7% in August as energy prices rebounded, according to EU-harmonised data.

The extreme weather over the summer has complicated a growth outlook that was already clouded by a series of external shocks over the past year, including a tariff dispute with the U.S., and high energy prices due to the U.S.-Israeli war with Iran.