2024-04-30 14:03:23
After several months of near stagnation, economic activity in France is picking up slightly. According to the first estimate from INSEE published this Tuesday morning, GDP increased by 0.2% in the first quarter of 2024.
A figure which corresponds to the upper range of forecasts. In its March economic report, the statistics institute expected further stagnation in the economy during the first three months of the year, when the Banque de France expected growth of 0.2%. .
“Our strategy is paying off”
“To all those who want to believe that our economy is at a standstill: the facts are stubborn. French growth is progressing. It is a new sign which reflects the solidity of our economy,” immediately reacted the Minister of Economy and Finance, Bruno Le Maire. “Our strategy is paying off,” he insisted.
Thanks to the dynamics of the first quarter, the year is in any case looking more favourable: the growth gain is in fact already established at 0.5 points at the end of the first quarter and no longer at the end of June, according to INSEE.
In view of these figures, the government’s objective of 1% growth over the whole year no longer seems out of reach. To reach this figure, growth will have to settle at a quarterly rate of 0.3% from the second quarter. “This supports our growth scenario for 2024” which is based on a restart of consumption thanks to the increase in purchasing power, we assure Bercy. Until then, the consensus of economists expected a GDP increase of 0.7% in 2024, like the IMF.
Good surprises
The trend of the first quarter actually brings glimmers of hope. Final domestic demand made a positive contribution to GDP growth of 0.4 points, details INSEE. The two drivers of economic activity have had some pleasant surprises in store
First, household consumption increased by 0.4% over the period. In March, the French began buying food products and manufactured goods again. The slowdown in inflation is probably contributing to this recovery. Consumer prices increased by only 2.2% year-on-year in April, INSEE also announced on Tuesday. Food prices, in particular, saw a marked slowdown, up 1.2%.
Likewise, despite continued difficult credit conditions, business investment rebounded by 0.3%, while many forecasters were banking on a further decline. “It held up more than we thought with quite a bit of investment in IT services and business fleets,” underlined the director general of INSEE, Jean-Luc Tavernier, on BFM Business. Conversely, investment in real estate services fell by 8.6%.
It is true that the sectors experience varying fortunes. The food industry, which had been battered by inflation, is recovering, while the automobile industry remains hampered by supply difficulties. After several quarters of decline, production is finally stabilizing in the construction sector and increasing in market services.
The unknown of the savings rate
We will have to see if these trends are confirmed in the coming months. Economists like Bercy expect a recovery in consumption this year. The extent of the recovery will be decisive for growth over the whole year.
The government’s scenario is that the French will spend more “thanks to the decline in inflation, which would support real wages” and also save less. In the stability program sent to Brussels, the executive expects the savings rate to return to 17.2% of disposable income this year, compared to nearly 18% at the end of 2023. A hypothesis considered optimistic by experts. The latter note that in INSEE confidence surveys, the French have not really regained their morale and display savings intentions that are still high.
Zero contribution from foreign trade
On the business side, the climate also remains fragile. In the current context, managers remain cautious about their business prospects. The INSEE publication also shows a negative contribution of inventory variations to the evolution of GDP.
“In this still gloomy period in terms of activity, companies prefer to sell their goods,” explains Maxime Darmet, France economist at Allianz Trade. Waiting for better days. The hope is that with the fall in interest rates, investment has passed the period of difficulty, “and that it can rise again in the future”, observes Jean-Luc Tavernier.
In the coming months, economic activity could nevertheless benefit from a support factor in foreign trade. This should in fact benefit from the resumption of deliveries in the aeronautical industry. Given the weight of the sector – it represented almost 10% of total French exports in 2019, or around 3% of GDP – this could have a positive effect on growth.
In the meantime, the contribution of foreign trade to growth in the first quarter was zero. Imports certainly increased by 0.2% but exports grew faster (+0.5%).
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