PARIS (Reuters) – Inflation in France is expected to slow a little more sharply than expected by the end of the year with an easing of tensions on food prices, INSEE said on Thursday, which also raised its growth forecast for the French economy in 2023, with activity having been more dynamic than expected in the spring.
France’s gross domestic product (GDP) should increase by 0.9% in 2023, estimates the statistics institute in its economic update, whereas it previously forecast an increase of 0.6%.
This increase is mainly due to growth in the second quarter now estimated at 0.5% compared to the first three months of the year, against a previous estimate of only 0.1%.
“In France, the spring was marked by a slowdown in consumer prices and by more dynamic economic activity than expected, probably above its underlying trend. Employment, meanwhile, decelerated”, summarizes the ‘Insee.
Growth should however slow in the second half of the year, “in an international environment which seems relatively lackluster, and despite an expected slight rebound in household consumption”, with GDP growth of 0.1% in the third quarter and 0. 2% over the last three months of the year.
The government is counting on economic growth of 1% this year.
Although household consumption should rebound in the third quarter with the slowdown in food prices, whose year-on-year increase should increase from 11.1% in August to 7.2% at the end of the year, corporate investment risks revenge of suffering from high interest rates, predicts INSEE.
The slowdown in inflation should continue, even if the rebound in energy prices limits its magnitude, estimates the institute, which now expects inflation of 4.2% over one year in December, against a previous forecast of 4.4% and a rate of 4.8% in August.
Even if it tends to subside, the sharp rise in food prices has a powerful impact on the behavior of the French, observes INSEE.
Nearly one in two households (47%) surveyed in June by the institute said they had changed their food consumption habits over the past year due to inflation, a proportion up 10 points since December 2022, and 14% of households consumed less.
(Leigh Thomas and Bertrand Boucey, edited by Nicolas Delame)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
