PARIS (Reuters) – Insee on Thursday revised down its growth forecast for the French economy in the second quarter, due in particular to a drop in consumption and household investment, while inflation continue to decline in June.
France’s gross domestic product (GDP) should increase by 0.1% in the second quarter (revised down 0.1 point), in line with the latest outlook issued by the Banque de France.
“Household consumption should decline in the spring due to a further decline in food consumption, then only recover slightly in the second half of the year”, commented INSEE in its June economic report.
The economy should grow in the same proportion in the third quarter and then by 0.2% in the last quarter of 2023, supported by exports, in particular with aeronautical and naval deliveries.
Over the year, the institute anticipates growth of 0.6% of France’s GDP, against 2.5% last year, a lower anticipation than that of the French government.
The Minister of Finance, Bruno Le Maire, maintained his economic growth forecast for France at the end of May at 1% for the whole of the year despite a context deemed “more difficult”.
On the inflation side, the signs of a decline are starting to materialize, says INSEE, which confirmed on Thursday a 5.1% increase in the consumer price index (CPI) over one year in May, after 5.9% in April.
“This decline in inflation is explained in particular by the fall over one year in the prices of petroleum products (…) but also by the slowdown in the prices of other goods and services, including those of food (which still increase by more than 14% over one year, and 19% over two years), “says INSEE in its note.
For the month of June, the institute has revised down its inflation expectation in France to 4.6%, against 5.4% previously. This rate should reach 4.4% in December over one year.
During the second half of 2023, the rise in food prices could slow significantly, falling to 7.4% in December, according to INSEE.
The services sector would become the third largest contributor to inflation at the end of the year, after food and tobacco, because the rise in prices diffuses more slowly there than in the others, explained INSEE analysts to journalists.
(Written by Kate Entringer, edited by Blandine Hénault)
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