2023-10-31 08:45:33
Baptiste Morin with AFP // Photo credit: Benjamin Polge / Hans Lucas / Hans Lucas via AFP
After the surprise rebound in French growth in the second quarter, that of the summer markedly stalled, however remaining in positive territory thanks to the rebound in household consumption in a context of disinflation. The gross domestic product (GDP) grew modestly by 0.1% between July and September, according to a first estimate from the National Institute of Statistics (Insee), which sees its forecast confirmed.
“The French economy is holding up”
Despite the clear slowdown compared to the 0.6% growth recorded in the second quarter and revised upwards by 0.1 point by INSEE, the Minister of the Economy, Bruno Le Maire sees this as a sign of resilience of the French economy. “In a degraded environment, the French economy is holding up,” Bruno Le Maire told journalists, stressing that this resilience was part of an environment of “high” interest rates in order to curb inflation.
He confirmed the government’s forecast of annual growth of 1% in 2023, slightly higher than those of INSEE and the Banque de France (0.9%), following an increase of 2.5% in 2022. In the third quarter, economic activity benefited from a 0.7% rebound in household consumption, following sluggishness in the spring. Until now very penalizing for purchasing power, inflation recorded a clear slowdown to 4% over one year in October, according to INSEE, following 4.9% in September. Both energy prices (+5.2%) and food prices (+7.7%) have slowed significantly.
“We are emerging from the inflationary crisis”
After several consecutive quarters of decline, food consumption has started to rise once more, thanks to an easing of prices on the shelves, which had experienced double-digit spikes. “This is proof that for the first time in many months, household income is increasing faster than inflation,” said Bruno Le Maire. “There cannot be solid growth if we do not get rid of inflation once and for all, we are emerging from the inflationary crisis,” the minister added.
With a deteriorating economic context, a public debt of more than 3,000 billion euros and a public deficit beyond the reach of Brussels, Bruno Le Maire has no other choice now than to display great firmness on the public finances, if it wants to avoid further downgrades of France’s credit rating by the rating agencies, or financial sanctions from the European Commission.
Claiming to be intractable on debt reduction, he nevertheless admitted that “any extension of the conflict” in the Middle East risked slowing down global growth, while Bercy expects GDP growth of 1.4% in 2024 in France. Economists also fear that the high interest rates decided by the European Central Bank (ECB) to cool inflation will weigh on activity in the months to come, penalizing investments by households (in construction in particular) and businesses. companies, although the institution decided to take a break this month, following raising its key rate to 4%.
In the third quarter, business investment continued to show dynamism (+1.5%). On the other hand, following an energetic second quarter, exports contracted by 1.4% over the period, so that the contribution of foreign trade to quarterly growth is negative. Manufacturing production also fell, by 0.3%, and that of market services slowed to 0.3%.
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