Posted Jul 29, 2022, 8:08 AMUpdated on Jul 29, 2022 at 4:19 PM
This is good news for the government. Despite the mounting dangers (inflation at unprecedented levels, energy crisis, shortages), France returned to growth in the second quarter. And it even turned out to be much more robust than expected.
Between April and June 2022, GDP rebounded by 0.5%, after a decline of 0.2% in the previous three months, according to the provisional estimate published Friday by INSEE. Economic analysts were rather expecting a modest increase of 0.2%.
The Institute also revised its estimates for the four quarters of last year, helping to raise the growth overhang for 2022, estimated at 2.5% at the end of the second quarter. Either the objective of the executive (deemed too optimistic by the High Council of Public Finances) for the whole of the year.
Return of foreign tourists
Most of the improvement was fueled by the dynamism of accommodation-catering and transport services. Thanks to the return of foreign tourists to France, foreign trade also made a positive contribution to GDP of 0.4 points. Another indicator in the green: business investment continued to grow by 0.5%.
On the other hand, already at half mast in the first quarter (-1.5%), household consumption fell again in volume by 0.2% between April and June. With inflation at its highest for 30 years, the French budget is under severe strain despite support measures.
According to economists, household consumption could however be driven in the coming months by new measures of purchasing power: revaluation of social minima, pensions, the index point for civil servants, rebates at the pump, etc. The effects on growth should be beneficial. And the tourist season promises to be record high this summer.
Recession if Russian gas supplies stop
But as Bercy keeps repeating, the context remains “uncertain” and the “downside risks” numerous: risk of gas shortage, contraction of activity in the United States, confinements in China … “The more we will advance towards the end of the year, the more the French economy will slow down under the effect of the deterioration of the international situation, predicts Ana Boata, director of economic research at Allianz Trade. And a recession cannot be avoided next year in the event of a cut in Russian gas supplies. »
Without even considering this dark scenario, the IMF and the OFCE are only counting on a 1% increase in GDP in France in 2023. Bercy is aiming for 1.4% in its stability program.
“More cautious” borrowers
Activity in France will also be confronted with the rise in interest rates and the credit crunch. Clearly, borrowers are likely to be more cautious and banks more attentive…
Investment by households – in real estate – and by companies could then slow down, even if this is not the case for the time being. “The stock of debt will also cost more. This will degrade business margins by 2 to 3 points at the start of next year,” says Ana Boata.
“With each update, growth forecasts are lowered,” warns Bruno Cavalier, chief economist at Oddo-BHF. Pointing to “a reversal in the cycle”, the expert warns of “the risk of stagnation in activity in the coming months” and does not grow to 1.4% growth next year.