The French economy is doubling but not crashing. In an uncertain international context and in the face of persistent inflation, French activity slowed down at the end of 2022, but without receding, with GDP growth of 0.1% in the last quarter, compared with 0.2% in the third.
According to the latest INSEE economic report released on Tuesday, France should still escape recession at the start of the year with modest growth of 0.2% in the first and second quarters. The excess growth for 2023 at the end of the first half of the year, that is, the change in GDP if growth were zero in the second half of the year, is 0.6%.
Given the many uncertainties, this forecast could be called into question, especially if the strikes against the pension reform permanently disrupt certain services and, in particular, transport. “This impact would depend in particular on the duration and extent of the social movement”, notes the statistics institute, recalling however that “past episodes show that if this impact can be significant at the sectoral level, it is generally limited at the macroeconomic level. level (…)”.
The evolution of business costs, as well as the monetary tightening of central banks, are other factors that are likely to alter INSEE’s forecasts. On the contrary, “if the recent factors of optimism are confirmed” (good performance of the US economy, recovery of activity in China after the lifting of the restrictions by the Covid, etc.), the French economy could do better than expected. expected in early 2023, says the institute.
Industrial production resists despite the energy crisis
Among other elements that encourage optimism: the less serious consequences of the energy crisis than expected. This largely explains the resilience of the French economy observed so far. For example, if industrial production fell in the most energy-intensive branches such as chemicals at the end of 2022 (-8% in the 4th quarter), the decline was “relatively contained”, says the statistics institute.
At the same time, certain branches of industry have seen their activity progress thanks to convergence effects. This is the case of the manufacture of transport equipment (+10% one year), where supply difficulties are easing, of coking and refining, where production picked up in November after the October strikes, or more than production electricity, which has recovered thanks to the commissioning of nuclear reactors. All these are elements that should allow industrial production to advance slightly in early 2023.
After falling at the end of 2022, household consumption should also recover in the first quarter under the effect of the increase in energy consumption and the resumption of vehicle purchases, the production of which is increasingly less penalized by supply difficulties. However, the rebound could be limited if households continue to restrict themselves to foods that are particularly affected by inflation.
Companies more optimistic than households
When comparing the results of the various business surveys, INSEE notes a “strong dichotomy” between households and businesses. Although household morale continued to deteriorate, standing at 20 points below its long-term average in January, the business climate remains relatively stable and even slightly above its long-term average.
On the business side, this relative resilience can undoubtedly be explained by the gradual easing of the restrictions on supply. In manufacturing, while the proportion of companies saying they were experiencing supply difficulties remained high in January (30%, compared to 10% in the long term), it fell sharply compared to the level in July 2022 (45%). .
On the other hand, companies are noticing an increase in demand-related difficulties, with 29% of industrial companies saying they were facing them in January 2023, compared to 22% in July.
slow decline in inflation
At 6% in January for a year, inflation should slow down very gradually in the coming months. Initially, it should remain stable in February due to a rise in energy prices of 17.9% (compared to 16.3% in January) linked to the increase in the regulated sales tariff (by EDF) to 15% . The rise in food prices should stand at 13.7%, compared to 13.2% in January.
The slowdown in the rise in consumer prices should occur from March (5.2%) through the “base effect”. By mid-2023, inflation should be around 5% one year, but core inflation, which does not account for more volatile prices, should remain above 5.5%.
Source: BFM TV
