Will the continued decline in inflation in France allow the French economy to restart? Even if it is still slight, the first signs seem to point in this direction. According to provisional figures from INSEE, in April, inflation slowed further to 2.2% over one year, compared to 2.3% in March, while it was 5.9% in April. 2023.
A slight decline which is explained by the slowdown in food prices (+1.2% over one year, after +1.7% in March), tobacco (+9% after +10.7%), but by the slight decline in those of manufactured products (-0.1% after + 0.1%) unlike energy prices which accelerated (+ 3.8% after + 3.4%).
Even if these price increases continue to weigh on the purchasing power of households in the first quarter, the French gross domestic product (GDP) nevertheless increased by 0.2% in particular, thanks to household consumption but also with investments. companies, according to INSEE.
This estimate is better than previously announced. Initially, INSEE expected zero growth between January and March, after growth of 0.1% of GDP in the last quarter of 2023.
Bruno Le Maire welcomes
Bruno Le Maire welcomed this result on Tuesday, seeing it as a sign of the “solidity” of the country’s economy. “To all those who want to believe that our economy is at a standstill: the facts are stubborn. French growth is progressing. “It’s a new sign that reflects the solidity of our economy.”
And the Minister of the Economy added: “The government’s strategy is paying off”. For the record, the government is counting on growth in 2024 of 1% even if many analysts from economic institutes are betting more on 0.5%.
Over the first three months of the year, economic activity benefited from an acceleration in household consumption, the main driver of growth, which increased by 0.4% after 0.2% in the previous quarter.
A return to spending on food
If demand for services is still strong, the change comes from the return of spending, particularly in food, while this item was neglected after the sharp increases on certain products on the shelves of supermarkets and hypermarkets. According to experts, this return of households to stores should be confirmed during the next quarter.
Still, this relative good news on growth should not make us forget the thorns which still undermine the French economy, starting with the slippage of the deficit in 2023, to 5.5% of GDP compared to 4.9%.
If the government aims to get back on track by falling below the threshold of 3% of GDP in 2027, many doubt it. And even if the rating agencies have for the moment maintained their ratings on France’s capacity to repay its debt, they are not certain of this return to the green. The first president of the Court of Auditors, Pierre Moscovici, estimated Monday on Franceinfo that the deficit reduction trajectory “as it was presented lacked credibility and coherence”.
However, this situation where the government will seek to make savings (10 billion already announced and a cut of 10 billion to be made in 2024) simply risks breaking the dynamic of the start of growth. According to the OFCE, the first 10 billion in savings should already reduce annual growth by 0.2 points.