PARIS (Reuters) – Inflation in France should slow down a little more sharply than expected by the end of the year with an easing of tensions on food prices, INSEE said on Thursday, which also raised its growth forecast for the French economy in 2023, activity having been more dynamic than expected in the spring.
France’s gross domestic product (GDP) should increase by 0.9% in 2023, estimates the statistics institute in its economic update, whereas it previously forecast an increase of 0.6%.
This increase is mainly due to growth in the second quarter now estimated at 0.5% compared to the first three months of the year, compared to a previous estimate of only 0.1%.
“In France, the spring was marked by a slowdown in consumer prices and by economic activity that was more dynamic than expected, undoubtedly above its basic trend. Employment, for its part, decelerated,” summarizes the ‘Insee.
Growth should, however, slow down in the second half of the year, “in an international environment which seems relatively unfavorable, and despite an expected slight rebound in household consumption”, with GDP growth of 0.1% in the third quarter and 0. 2% over the last three months of the year.
The government is counting on economic growth of 1% this year.
If household consumption should rebound in the third quarter with the slowdown in food prices, whose increase over one year should drop from 11.1% in August to 7.2% at the end of the year, business investment risks revenge of suffering from high interest rates, predicts INSEE.
The slowdown in inflation should continue, even if the rebound in energy prices limits its extent, estimates the institute, which now expects inflation of 4.2% over one year in December, compared to a previous forecast of 4.4% and a rate of 4.8% in August.
Even if it tends to ease, the sharp rise in food prices has a powerful impact on the behavior of the French, observes INSEE.
Nearly one in two households (47%) surveyed in June by the institute declared having changed their food consumption habits over the past year due to inflation, a proportion up 10 points since December 2022, and 14% of households consumed less.
(Leigh Thomas and Bertrand Boucey, edited by Nicolas Delame)
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