French GDP growth should reach 0.2% in the second quarter, as in the first, INSEE said on Friday, confirming its previous estimate. “The growth overhang for 2023 would amount to 0.5% at the end of the second quarter”, details INSEE in its latest economic report. In other words, even if growth were zero in the second half of the year, France would still register a half-percentage-point increase in its gross domestic product in 2023.
After 2.6% in 2022, the government expects GDP growth of 1% in 2023, a forecast higher than those of the Banque de France (0.6%) and the International Monetary Fund (0.7%). %). The weakness of economic activity can be explained in particular by the sluggishness of household consumption, the traditional driver of French growth.
Lower inflation ahead of summer
“In the second quarter of 2023 (…), the consumption of goods, including food consumption in particular, should continue to fall back, while that of services should increase again slightly and energy expenditure should continue to rebound”, anticipates INSEE in his note on the situation. The strikes of the first quarter against the pension reform “do not seem, however, to have had a significant effect on consumption, except probably on that of rail transport”, still note the statisticians.
With regard to inflation, which will rise in 2022 to levels not seen since the 1980s, INSEE forecasts that the consumer price index will increase by 5.7% over one year in May and by 5.4% in June, after reaching 5.9% in April and more than 6% in recent months. Inflation in the price of food products is the main cause of maintaining inflation at a high level: in April, it would thus have contributed “to the tune of 40% to inflation, whereas it represents ‘only’ 16% of the average household consumption basket.
By June, “consumer prices of food products would maintain a sustained rate of increase (between 15 and 16% over one year)”, anticipates INSEE, even if a possible reopening of trade negotiations between distributors and agro-food manufacturers could lead to a “later slowdown”. In Q2, France’s foreign trade “could slightly support” growth, while corporate investment should continue to slow and household investment to decline.