Modest growth in France? INSEE delivers its verdict on the second quarter

Decline in household consumption, maintenance of their savings at high levels, slowdown in corporate investment, drying up of access to credit with the sharp rise in interest rates: the spring may have been foggy for activity economic.

After a first quarter marked by modest growth of 0,2%, INSEE will indicate whether its forecast of a 0,1% increase in gross domestic product (GDP) is confirmed or not for the period from April to June. .

“Almost all the indicators point to a very marked weakening of growth,” notes Maxime Darmet, economist at Allianz Trade, interviewed by AFP.

The traditional engine of the economy, household spending continued to suffer from high inflation.

This began to decline during the quarter, past its peak and falling to 4,5% over one year in June against 5,1% in May and 5,9% in April, thanks to the decline in energy, but food prices continued to soar, rising almost 14%.

In an attempt to curb these price rises and return to 2025% inflation by 2, the European Central Bank (ECB) has been carrying out monetary tightening on an unprecedented scale for the past year, resulting in a marked increase in key rates.

While credit had so far supported household consumption, their investments and those of businesses, this tightening of financial conditions is also beginning to weigh on demand.

No recession

Among the elements of resilience this time, Stéphane Colliac, an economist at BNP Paribas, lists the good performance of the automotive and aeronautical sectors, tourism and transport, which experienced an upturn in activity in the second quarter after the strikes linked to the reform of retreats.

"But the slightest demand has an impact on growth since it constrains production" with order books now "weaker", underlines the economist with AFP.

His colleague Maxime Darmet notes an increase in stocks, which he considers "bad omen". It reflects a surplus of supply and "it is generally a sign of a downturn in the cycle".

INSEE published two other indicators on Friday which also make it possible to take the pulse of the country's economic situation: a provisional estimate of inflation in July and household consumption in June.

This mixed picture for the second quarter announces a sharp slowdown for the whole of 2023, with a forecast increase of 0,6% in GDP, according to INSEE, far from the 2,5% of 2022.

The government is more optimistic so far, banking on 1% growth, but it could revise its forecasts when the 2024 budget is presented in September.

According to the International Monetary Fund (IMF), France would however escape recession this year, unlike Germany, and would resist even better than it had anticipated so far. Its forecast was raised to 0,8% (+0,1 point compared to April).

The will of the executive to restore public finances undermined by the crises by deploying a more restrictive budgetary policy - with in particular the reduction of the tariff shield - should weigh. Thus, regulated electricity tariffs will increase by 10% on 1 August.

These negative effects would however be offset by more or less the maintenance of employment and the acceleration of wage growth, which catches up with inflation with a lag. With the key, a small rebound in household consumption.