The National Institute of Statistics and Economic Studies (Insee) announced on Friday July 28 that the evolution of the gross domestic product (GDP) in France stood at 0.5% between the months of April and of June. His forecast was 0.1% for this period. French growth was 0.1% in the previous quarter.
Economy Minister Bruno Le Maire immediately hailed a “remarkable performance” and confirmed the government’s growth forecast of 1% in 2023.
This improvement is based on the good performance of exports, especially transport equipment, while imports are rebounding less strongly. Thus, foreign trade made a positive contribution to quarterly growth. The latter also benefited from the dynamism of the manufacturing industry, the market services sector and energy production, supported by the reopening of nuclear power plants.
Conversely, household consumption fell by 0.4% in the second quarter, with a marked decline of 2.7% in food and despite a recovery of 0.9% in June. It fell for the sixth quarter in a row, still affected by double-digit inflation. In a separate publication, however, INSEE reported a sharp rebound (2.5%) in food consumption in June alone.
Slowdown for the whole of 2023
Consumer price inflation slowed again in July, standing at 4.3% year on year after reaching 4.5% in June and more than 6% at the start of the year, the report also announced. ‘Insee. This deceleration can be explained both by a lesser increase in food prices (up 12.6% year on year, compared to 13.7% in June) and a more marked drop than in June in energy prices ( down 3.8%, compared to 3% previously).
In an attempt to curb these price increases and return to 2% inflation by 2025, the European Central Bank has been tightening monetary policy on an unprecedented scale for the past year, resulting in a marked increase in key rates.
While credit had so far supported household consumption, their investments and those of businesses, this tightening of financial conditions is also beginning to weigh on demand.
This second quarter table announces, despite a higher than estimated result, a slowdown for the whole of 2023, with a forecast increase of 0.6% in GDP, according to INSEE, far from 2.5 % of 2022. The government has so far been more optimistic, betting on 1% growth, but it could revise its forecast when it presents the 2024 budget in September.
According to the International Monetary Fund (IMF), France would however escape recession this year, unlike Germany, and would resist better than what was anticipated so far. Its forecast was raised to 0.8% (0.1 points from April).
The will of the executive to restore public finances undermined by the crises by deploying a more restrictive budgetary policy – ??with in particular the reduction of the tariff shield – should weigh. Thus, regulated electricity prices will increase by 10% on August 1.
These negative effects would however be offset by more or less the maintenance of employment and the acceleration of wage growth, which catches up with inflation with a lag. With the key, a small rebound in household consumption.
