Slight growth, but growth nonetheless. French economic activity is expected to continue to grow slightly in the second quarter as prices begin to ease in industry for the first time since the Covid crisis, the Banque de France said on Wednesday. Between April and June, the gross domestic product (GDP) would be “up slightly” compared to the first quarter when it had increased by 0.2%, according to the central bank.
“In April, activity progressed in the three main sectors: industry, services and building”, indicated Olivier Garnier, director general of statistics, studies and international affairs at the Banque de France, presenting the monthly survey. of the institution’s situation. It benefited in particular from a rebound effect in the sectors affected by the strikes against the pension reform in March, such as transport and energy. Activity should then stabilize in May in services, while industry and construction should fall back, anticipations attributable in part to the more numerous holidays that month.
Lower commodity prices
For the year as a whole, the Banque de France is still counting on GDP growth of 0.6%, lower than that forecast by the government (1%) and much lower than that of 2.6% recorded in 2022. “Last fall, there were fears of a recession following the invasion of Ukraine, it’s good news to have only this slowdown,” Banque de France Governor Francois said on Wednesday. Villeroy de Galhau, in an interview with the regional newspapers of the Ebra group.
In a context of inflation that remains high, at its highest in almost four decades, this modest resistance of growth is accompanied for the first time since the summer of 2020 by an easing of prices in industry. Manufacturers believe that prices are falling for raw materials and stabilizing for finished products, according to the business survey conducted among around 8,500 companies from April 26 to May 4. “We clearly see a change in the trend in producer prices in the manufacturing sector,” explained Mr. Garnier. “This is not yet the case for selling prices in services and construction, but this tends to confirm our scenario of the start of a decline in inflation, at the level of consumer prices, during of the second half of the year 2023”, he estimated.
Inflation “passing its peak”
In the regional press, the governor of the institution, François Villeroy de Galhau, estimated that inflation was “passing its peak”. The rise in consumer prices reached 5.9% over one year in April, according to the National Institute of Statistics (Insee), now fueled by food prices which are experiencing double-digit surges and have supplanted energy as its main driving force. The Banque de France estimates that it should fall to 4% at the end of 2023 then return to around 2% by the end of 2024 or 2025, also under the effect of interest rate increases decided by the European Central Bank (ECB ).
“It will normally happen to food inflation what happened to energy inflation: the reversal in world prices, in this case agricultural prices, should have an effect on consumer prices with a few quarters late, with therefore a significant slowdown in food inflation during the second half of the year”, declared its governor.
The bulk of the difficulties are behind
In order to push them to pass on the declines in certain raw materials more quickly, the Ministry of the Economy brings together the heavyweights of distribution on Thursday. A meeting is planned later with the manufacturers.
Among the business leaders questioned by the business tendency survey, 13% said they had increased their selling prices in industry in April, much less than a year earlier (49%). In the food industry, the proportion fell from 53% to 19% in one year. An upturn is also pointing to the supply front, which had been greatly disrupted by the Covid crisis. “In industry, the bulk of these difficulties are clearly behind us,” assured Olivier Garnier.