The French economy expected just in the green in the first half of 2023

The year 2023 should start as 2022 ended, anticipates Tuesday the National Institute of Statistics (Insee), with "modest" growth.

After having progressed by a timid 0,1% in Q0,2, Gross Domestic Product (GDP) should thus register an increase of 0,2% in Q0,1 then of 0,3% again in QXNUMX, against respectively XNUMX, XNUMX% and XNUMX% predicted previously.

"We are in a rather hesitant economic situation, neither frankly favorable nor frankly unfavorable", summarized Julien Pouget, head of the economic situation department of INSEE during a press conference.

It is "a hesitant and, all in all, relatively resilient situation", he said, noting however a "strong dichotomy" between businesses and households.

Inflation "plateau"

Traditional driver of the French economy, household consumption should rebound "modestly" after a sharp decline at the end of 2022, driven by energy consumption if the winter turns out to be normally cold. The 15% increase in regulated gas and electricity prices could, however, encourage sobriety.

While purchases of vehicles would continue to progress, those of food products could remain penalized by double-digit price increases, with up to 13,7% over one year in this sector expected in February, according to INSEE.

Overall, the rise in consumer prices should remain on a "plateau", around 6% over one year in February, levels not seen in nearly four decades, before gradually receding to 5% in June.

"This does not mean that the price level would drop, it means that overall, the price index would change less quickly than a year ago", underlined Julien Pouget.

While past shocks, linked in particular to the war in Ukraine, would continue to produce their effects and fuel price growth, the gradual normalization of global supplies and a falling oil price would play a downward role.

Since the contribution of food now weighs more than energy in this indicator, core inflation (excluding energy and fresh food products) should nevertheless remain above this level, at 5,7% in mid-2023.

Strikes

Support for the economy will come mainly from industrial production, which could "up slightly" in the first quarter, according to the institute.

It will benefit from the rebound in coking-refining which had suffered from the October strikes, fewer supply difficulties and increased electricity production with the return to service of nuclear reactors.

In services, activity should still show "a moderate pace".

However, these forecasts do not take into account the possible impact of strikes against the pension reform, which could have a greater impact on certain sectors such as transport.

The massive mobilizations against previous pension reforms had cost around 0,2 points of quarterly GDP, recalled Julien Pouget. "Since then, telework has developed a lot for health reasons at the start, which is possibly likely to lessen the macroeconomic impact of these strikes."

In summary, these are "supporting factors which are quite modest but which would still be enough to keep growth in slightly positive territory", he underlined, while noting that the international context remained "uncertain".

INSEE has not provided a forecast for the whole of 2023, while the government is counting on growth of 1%.