2023-06-08 20:43:42
The Banque de France estimates that the peak of inflation is “probably reached”. ERIC GAILLARD / REUTERS
The Banque de France forecasts growth of 0.1% in the second quarter.
The French economy should continue to resist modestly in the second quarter as prices ease in the main sectors of activity, the Banque de France announced on Thursday, signaling that the peak of inflation will be “probably reached” over the period. Between April and June, the gross domestic product (GDP) would progress according to its forecasts of 0.1% compared to the first quarter, where it had increased by 0.2%. “Month after month, the activity continues to progress even if it is at a moderate pace”said Thursday Olivier Garnier, Director General of Statistics, Studies and International Affairs at the Banque de France, presenting the institution’s new monthly economic survey.
“Slowdown” in prices
This forecast for the second quarter is lower than that of the National Institute of Statistics (Insee), which expects a 0.2% increase in GDP. There “business resilience” would be based on an increase in industry and services in May, which should continue in June, explained Olivier Garnier about this survey conducted by the Banque de France among around 8,500 companies between May 26 and June 5 . The building sector should also experience an upturn in June, especially in finishings, after a decline the previous month, particularly for new builds. “We are more in a scenario of continued growth but (…) we do not really see any potential for acceleration at this stage”, the manager said.
On the price front, the Banque de France reported an improvement, in a context of inflation which remains high, however. Like the previous month already in the industry, which is returning to a pace of price growth comparable to the pre-Covid period, “we are now also seeing a clear shift in service prices”, underlined Olivier Garnier. Prices are also slowing in construction. “This reinforces our belief that the peak of inflation is probably reached during the second quarter of this year, and that we should see a slowdown during the second half of the year”, he added.
Read alsoBoosted by inflation, the 2023 property tax soars in all municipalities
According to an initial estimate by INSEE, inflation marked a marked slowdown in May in France, benefiting from a serious slowdown in energy, the origin of the inflationary shock but since supplanted by food. Prices thus continued to rise over one year, by 5.1%, but less sharply than in previous months (5.9% in April and 6% at the start of the year). According to the Banque de France, this relaxation in prices is benefiting in particular from fewer supply difficulties. In industry, 23% of companies surveyed mentioned them in May, compared to 28% in April. The proportion drops from 17% to 15% in construction. “In many sectors, we are almost back to normal”estimated Olivier Garnier.
Recruitment difficulties
But if manufacturers mention a “significant decline” raw material prices in May, they doubt they will be able to pass it on in its entirety to selling prices due to the increase in the cost of inputs and wage increases. Thus, 5% of manufacturers say they lowered their selling prices in May, 10% increased them and even 13% in the food industry, a sector accused by the government of dragging its feet to revise its prices downwards. In services, 12% of companies say they have raised their prices, compared to 19% in April.
Read alsoThe race for hiring is launched in the nuclear industry
As factors less favorable to growth, Olivier Garnier cited the further increase in inventories of finished products in May in most sectors, reflecting less dynamic demand from customers. Despite a slight downturn, recruitment difficulties remain high, according to 49% of the companies consulted. Manufacturers are also anticipating a further decline in their order books. For the year as a whole, the Banque de France is still expecting GDP growth of 0.6%, lower than that forecast by the government (1%) and much lower than the 2.6% recorded in 2022.
#French #economy #resists #quarter #peak #inflation #reached