Unveiled this Thursday, September 7, the new forecast from the Institute of Statistics (0.9%), which until now anticipated an increase of 0.6% in gross domestic product (GDP), is getting closer to an increase of 1 % expected by the government. This revision follows a second quarter which was distinguished by an unexpected rebound of 0.5% in gross domestic product (GDP) thanks to dynamic exports.
This improvement would, however, be followed by a clear slowdown, with GDP increasing by 0.1% in the third quarter and 0.2% in the fourth. So much so that annual growth would remain well below that of 2.5% recorded in 2022, a year which was still in the wake of the post-Covid recovery.
On the price front, INSEE predicts that inflation will decline to 4.2% over one year in December, after having exceeded 6% at the start of the year. It should stand at 5% on average per year (compared to 5.2% in 2022). This slowdown should also apply to food prices, the rise of which should reach 7.2% over one year in December. In this sector, prices had recorded double-digit surges, approaching 16% year-on-year in March and pushing households to consume less.
“Not much spring”
“The slowdown in prices is bringing some breathing space to consumers […] and businesses”, making it possible to record “positive but modest growth” in the second half of the year, commented Julien Pouget, head of the INSEE economic department, during a press conference. “But (it does not there is) not much spring because inflation remains high for households and […] interest rates also remain high,” he added.
The slowdown in inflation, despite a jump in August, would give a slight boost to household consumption, the traditional engine of French growth. At the same time, exports would slow down while the sharp rise in interest rates decided by the European Central Bank (ECB) would penalize investments by businesses and households, particularly in construction.