The French economy should continue to resist in early 2023, according to the Banque de France

Sustained inflation which is eating into purchasing power, energy prices which have soared since the Russian invasion of Ukraine, tensions over post-Covid supplies... Faced with the accumulating hazards, the economy is bent without breaking.

“Resilience is confirmed and even prolonged,” said the director general of the French central bank, Olivier Garnier, during a press briefing.

"There is a level of concern about the future which remains high (...), but despite everything, month after month, activity continues to progress slightly, even if it is of course in a less sustained way than in the first half of 2022," added the economist.

Growth in gross domestic product (GDP) should thus reach 0,1% in the fourth quarter of 2022, taking into account the penalizing effect of the fall strikes in refineries and maintenance of nuclear power plants, with a "slight increase in December", according to the institution.

It should then become "almost stable" in January.

For the whole of 2022, the Banque de France confirmed its forecast for growth of 2,6% (compared to 2,5% for INSEE), before a sharp drop in speed in 2023, to + 0,3% according to its main scenario.

But there are still "a lot of uncertainties weighing on the first quarter", noted Mr. Garnier. A "limited and temporary" recession is not excluded by the institution.

In the medium term, the Banque de France expects an economic cycle with three "Rs": resilience, slowdown and recovery from 2024.

The government, which has deployed a battery of aid to support businesses and households, is counting on a 2,7% increase in GDP in 2022, before a sharp slowdown to 1% this year, a scenario deemed too optimistic by many economic institutes.

Sectoral disparities

In detail, activity continued to grow in December in industry, services and construction, more strongly than anticipated the previous month, according to the results of the latest monthly survey carried out among 8.500 business leaders between December 20 and January 5.

Mr. Garnier cited in particular an easing of fears relating to energy supplies, thanks to the mild winter temperatures, and order books still "well stocked" despite a decline.

This is particularly the case in aeronautics, computer products and electrical equipment. But order books are considered "low" in chemicals and rubber-plastic products.

In January, activity should progress a little in services and industry, with however strong sectoral disparities: decline in clothing or rubber-plastic in particular, increase in pharmaceuticals, automobiles or aeronautics. She would be stable in the building.

Like the other major Western economies, France is facing a surge in inflation, which should peak in the first half of 2023, but its central bank notes a "slight moderation in the rise in prices in industry, even if it remains sustained" in December. No inflection, however, in services and construction.

For January, "business leaders anticipate a sharp rise in prices", which "would be greater than the seasonal increase traditionally observed at the start of the year", specifies the bank. Increases that some companies pass on to their selling prices.

In December, supply difficulties receded, the cash position stabilized but at a "relatively low" level in industry, while recruitment remained difficult.

Inventories continued to rise, remaining at a "high" level due to a drop in demand or supply difficulties in particular, or even fears of possible energy shortages in the coming months.

As for the impact of the energy crisis on their activity in December, companies did not report any significant change compared to the previous two months.

Thus, 23% of them say they were affected in December. They are however 32% to expect an impact over the next three months, and even more numerous to fear for their margins (52%).