2023-06-15 16:13:50
The French economy is expected to experience a sharp deceleration in 2023, with high prices continuing to dampen household consumption despite an expected cooling in inflation, notably in food, INSEE said on Thursday. In unveiling its annual forecasts for the first time, the National Institute of Statistics noted a deterioration in the economic situation, with growth engines idling, one of the rare improvements coming from inflation, which should continue a reflux that began in the spring.
Inflation would stand at 5% on annual average
Gross domestic product (GDP) should record an increase of 0.6% over 2023 following a more dynamic increase of 2.5% in 2022. This forecast is similar to that of the Banque de France but more pessimistic than that of the government (1 %). On an annual average, inflation would stand at 5%, once morest 5.2% last year. But slowing inflation does not imply lower prices. These will continue to rise, contributing to the slowdown in activity since inflation is putting a strain on household consumption.
This should fall by 0.2% in 2023 (following +2.1% in 2022), whereas it usually contributes to driving the French economy. It should dip in the spring, especially in food, where prices are experiencing double-digit surges, before rebounding slightly thanks to the slowdown in prices.
Household consumption in negative territory, a first since 2012
This is the first time since 2012 that household consumption has gone into negative territory, with the exception of the year of the pandemic in 2020. Another weak link in growth: household investments, in real estate in particular, as those of companies would mark time, under the effect of high interest rates following the muscular monetary tightening carried out by the European Central Bank (ECB) to curb inflation.
Foreign trade, thanks to exports, would support growth. There is “this inflation which weighs on domestic demand, and then the first consequences of monetary tightening on the real economy”, summed up Julien Pouget, head of the economic situation department of INSEE, during a conference of press. “Inflation (…) remains relatively high, even if it has begun to ebb,” he added.
Food price increases set to slow
The rise in consumer prices, which directly affects households in their portfolios, should continue the decline that began in the spring to stand at 4.4% in December over one year. It had slowed to 5.1% in May following 6% in January. It would benefit from a strong lull in energy prices which had soared following the outbreak of the war in Ukraine. Above all, the rise in food prices should slow down markedly thanks to the decline in the prices of agricultural raw materials and energy. After +14.3% over one year in May, inflation should thus be almost halved in December (+7.4%). As an annual average, they would be 11.8% higher than in 2022.
INSEE stresses that the evolution of food prices will however also depend on the result of trade renegotiations between distributors and the food industry, reopened under pressure from the government, which wants to see labels drop in supermarkets.
The food industry is raising its margins
Another factor likely to influence their development: the margin rate of companies in the sector, which has increased sharply following suffering during the health crisis. The agri-food industry has raised its margins, which had suffered during the health crisis, which is driving up production prices, underlines in substance Olivier Simon, head of the economic summary division. Manufactured goods should also slow down, unlike services due to wage increases. The sector should become the main component of inflation ahead of food at the end of the year.
The slowdown in prices, combined with an increase in income, would allow household purchasing power to remain stable. The savings rate would remain at a high level, 18%. In this context of modest growth, employment, which has remained very dynamic until now, might slow down between now and the end of the year. But given a slower increase in the working population, the unemployment rate should stabilize at 7.1%.
In detail for 2023, following a rise of 0.2% in the first quarter, GDP should progress by 0.1% in the second (revised downwards) and third quarters, then by 0.2% over the last three months of the year. ‘year.
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