French economic activity stagnated in the first quarter, with zero growth (0%), due to a decline in household consumption against a backdrop of inflation and the war in Ukraine, according to an initial estimate published on Friday 29 April by INSEE.
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This estimate is well below expectations, the National Institute of Statistics having forecast growth of 0.3%, while the Banque de France was counting on a small increase in gross domestic product (GDP) of 0.25%.
Context of war in Ukraine
Economic activity is thus clearly marking time after the 0.8% growth recorded in the fourth quarter of 2021 (figure revised upwards by 0.1 point) and the strong recovery for the whole of last year (7 %).
Traditionally the engine of French growth, household consumption has fallen “clearly” in the first quarter, indicates INSEE, taking the forecasts of economists by surprise, who expected it to resist again at the start of the year.
The very strong Omicron wave in January, the rise in prices, in particular of energy, accentuated since the outbreak of the war in Ukraine at the end of February, have thus constrained household spending, particularly in accommodation-catering and textile-clothing. Inflation thus reached 4.5% over one year in March, a level not seen since the mid-1980s.
Covid-19
The health crisis, still very present in January, further affected the production of goods and services in the first quarter (which increased by 0.5%), with a sharp drop in activity in the hotel and catering industry, education services , “linked to the closure of certain classes”, and conversely an improvement in health services. Goods production accelerated after two quarters of stability.
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For the moment, investment is holding up well, even if it is slowing down, with an increase of 0.2% in the first quarter, driven by investments in IT services in connection with the growing digitization of companies.
Finally, foreign trade continues to recover, even if it is at “However, a slower pace than the previous quarter”underlines INSEE, with an increase of 1.5% in exports, when imports increased by 1.1%.