PARIS (Reuters) - France's economy accelerated in the third quarter thanks to the Olympic Games but is set to go into reverse before the end of the year, the country's INSEE statistics agency forecast on Monday.
An influx of tourists attending the Paris Olympics boosted consumer spending in the euro zone's second-biggest economy, providing a reprieve as political wrangling in the wake of July's hung parliament rattled businesses.
The economy is set to grow 0.4% in the third quarter from the previous three months when it expanded 0.2%, INSEE said in its latest economic outlook, trimming its forecast from 0.5% previously.
INSEE said it expected the Olympics to provide a 0.3% boost, due in large part to the sale of tickets, television broadcasting rights and tourists shelling out cash on hotels and restaurants.
As that impact quickly fades, the economy was seen contracting 0.1% in the final quarter of the year, leaving France with full-year growth of 1.1%, INSEE said, keeping its estimate unchanged.
INSEE's 2024 forecast aligns with government projections after Finance Minister Bruno Le Maire suggested over the summer that growth could be a tad stronger than the official forecast of 1% thanks to the Olympics.
After weeks struggling to find a new prime minister, President Emmanuel Macron named conservative political veteran Michel Barnier on Friday, who now must scramble to form a cabinet and draft a 2025 budget, which is certain to get a rough ride in the deeply divided post-election parliament.
With little sign the political crisis will subside, INSEE said that businesses were likely to remain skittish, putting off investment plans amid high interest rates.
Weakness in the German economy, France's biggest trade partner, further clouded the outlook for French exporters, INSEE said.
Lower inflation would however continue to boost households purchasing power, helping to offset some of the post-Olympic drag on consumer spending.
INSEE forecast that inflation would remain below 2% for the rest of the year and reach 1.6% by December.