Economic Stagnation and Export Contraction in France, 2026: A Time-Series Growth-Accounting Analysis of the GDP Slowdown through Keynesian Demand Theory

Abstract

This paper applies a quantitative time-series and growth-accounting approach to explain the stagnation of the French economy observed in the first quarter of 2026, when seasonally adjusted GDP growth registered 0.0 percent following 0.2 percent in the previous quarter — the weakest reading in five quarters. Using official INSEE national accounts data on the expenditure-side and production-side components of GDP for 2024Q3–2026Q1, the paper decomposes quarter-on-quarter growth into the contributions of domestic demand (household consumption and gross fixed capital formation), net foreign trade, and inventory change, and separately examines sectoral output across services, construction, manufacturing, and energy. The analysis is interpreted through Keynesian Demand Theory, which attributes short-run output fluctuations primarily to shifts in aggregate demand rather than supply-side capacity constraints. The decomposition shows that the Q1 2026 stagnation was driven jointly by a collapse in the net-trade contribution (from +0.6 to −0.7 percentage points, driven by a 3.8 percent quarterly fall in exports) and a flattening of domestic final demand (from +0.4 to 0.0 percentage points), offset only partially by a strongly positive inventory contribution that is itself consistent with weak realized demand rather than planned expansion. The results support a demand-side reading of the slowdown, consistent with the Bank of France and European Commission's attribution of the shock to imported energy-price inflation from the Middle East conflict rather than to a deterioration in French productive capacity. The paper concludes with implications for near-term fiscal and monetary policy responses appropriate to a demand-driven, rather than supply-driven, growth shock.