France set to keep away from recession as economic system expands in fourth quarter

France’s economic system unexpectedly expanded barely within the ultimate quarter of 2022, signalling the eurozone’s second-largest economic system is about to keep away from falling into recession.

The economic system grew by 0.1 per cent between the third and fourth quarters, the nationwide statistics bureau Insee stated on Tuesday. Whereas that was under the 0.2 per cent growth recorded over the earlier quarter, it was a slight enchancment on forecasts of no change recorded by Reuters.

The French determine comes after Germany reported a fourth-quarter contraction of 0.2 per cent on Monday, putting the eurozone’s largest economic system on the point of recession. Eurozone figures out later at this time are anticipated to point out the area’s economic system shrank by 0.1 per cent.

Finance minister Bruno Le Maire stated the French development was “a testomony to the robust rebound of our economic system after the Covid shock and its resilience within the face of the power disaster”.

France’s economic system is now 1.2 per cent bigger than earlier than the coronavirus pandemic — a stronger restoration than Germany’s.

Le Maire stated the French economic system would proceed to develop all through 2023. “The resilience of our entrepreneurs and staff is outstanding. Let’s stick with it!”

Nonetheless, Charlotte de Montpellier, senior economist on the financial institution ING, stated this 12 months can be “characterised by near-stagnation” of France’s economic system.

International commerce drove French development in the course of the fourth quarter as imports fell sharply, reflecting weakening demand. Funding additionally expanded, however family consumption fell by 0.9 per cent as larger power prices hit family funds. Spending on meals fell for the fourth consecutive quarter, whereas spending on power plunged 5.5 per cent, reflecting delicate climate and efforts to cut back consumption.

The economic system grew 2.6 per cent in 2022, reflecting a rebound in exercise because the pandemic receded.

Separate information additionally revealed on Tuesday confirmed French inflation accelerated within the 12 months to January. The preliminary harmonised annual inflation price rose to 7 per cent, up from 6.7 per cent within the earlier month, reflecting sharper worth development for power and meals.

Whereas French inflation has been decrease than elsewhere in Europe because of authorities programmes to cap power costs, economists count on worth development to fall extra slowly right here this 12 months.

Riccardo Marcelli Fabiani, economist at Oxford Economics, a analysis firm, stated: “The federal government is more likely to restrict the autumn in retail costs because it unwinds family assist and phases out different measures because of their excessive prices.”

Separate information revealed on Tuesday confirmed German retail gross sales fell sharply in December and recorded the biggest contraction since data started in 1994 for meals gross sales, reflecting the affect of upper costs.

Extra reporting by Daria Mosolova in London and Leila Abboud in Paris