2024-05-02 15:00:24
According to INSEE, gross domestic product (GDP) increased by 0.2% in the first quarter, although initial forecasts did not anticipate any progress. This performance is mainly due to strong household consumption and renewed investment, two of the drivers that helped revive the economy after a period of stagnation.
Consumption and investment, pillars for the restart of growth
« For all those who want to believe that our economy is stagnant: the facts are unclear. France‘s growth is progressing. This is a new sign of the strength of our economy », declared the Minister of Economy, Bruno Le Maire, not to hide his satisfaction after the performance of the first quarter.
Household consumption was particularly dynamic, recording a 0.4% increase this quarter, helped by the fall in inflation and an increase in social benefits, especially pensions. This development is seen as an encouraging sign for purchasing power. In addition, inflation continues to slow down, reaching 2.2% in April, which could further support consumption in the coming months.
On the other hand, Business investment also showed signs of recovery, a surprise factor given previous fears about corporate cash flow and the rise in insolvencies in 2023. However, investment was expected to be the missing link in growth this year, according to analysts whose contrary forecasts. Investment increased by 0.3% after a 0.9% decline in the last quarter of 2023, suggesting that business confidence may be recovering.
Budgetary challenges to overcome
Despite these positive signs, still fragile growth and depending on consumption and investment. The Government’s forecasts, adjusted to 1% for 2024, now appear feasible, but are highly dependent on the continuation of this trend. Some analysts, like Natixis, are even more optimistic with a growth projection of 1.1%!
However, challenges remain, particularly in relation to the public deficit. Cuts in public spending may be key to achieving the executive’s deficit targets consider future growth. The government has already announced cuts of €10 billion in state spending and is considering further cuts.
With growth that seems to be picking up and an economic context that is still uncertain, the government and the economic players are still cautious but a little more optimistic, hoping to confirm this trend in the coming quarter.
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