PARIS (Reuters) – The French economy accelerated in the first quarter of 2024 in a context of recovery in household consumption, supported by services, while inflation remains stable, show figures published on Tuesday by INSEE.
France’s gross domestic product (GDP) grew by 0.2% over the first three months of the year, a figure higher than the expectations of economists polled by Reuters who were counting on an increase of 0.1%, as in fourth quarter 2022.
“Final domestic demand (excluding stocks) is starting to rise again and is contributing positively to GDP growth this quarter (+0.4 points after 0.0 points in the fourth quarter of 2023),” INSEE explained in a note.
This is due to the acceleration in household consumption (+0.4% after +0.2%) and the rebound in investment (gross fixed capital formation +0.3% after -0.9%). .
“Conversely, the contribution of foreign trade to growth is declining and is zero in the first quarter of 2024 (0.0 point after +1.0 point),” adds INSEE.
Imports started to rise again (+0.2% after -2.3%) and exports increased by 0.5% after +0.4%.
This first estimate of GDP is in line with the expectations expressed by the Banque de France, which in April maintained its growth forecast for the French economy at 0.2% in the first quarter compared to the previous three months, citing the increase in market services. .
“The growth achieved at the end of the first quarter will therefore be higher than expected, at 0.5%. This means that the government’s growth forecast of 1% for the year will be more easily achievable than expected, even if this forecast remains ambitious”, notes Charlotte de Montpellier, senior economist at ING.
The acceleration in activity is nevertheless unlikely to continue in the coming months, while the latest leading indicators show a deterioration in economic sentiment, underlines ING.
PRICE DYNAMICS
INSEE figures also showed that inflation had rebounded over one month in April, due to the rise in prices of services.
Consumer prices are expected to increase by 0.5% over one month in April according to preliminary data, as expected by the consensus, after an increase of 0.2% in March. INSEE emphasizes that this acceleration “would be due to the increase in the prices of services, in particular transport and other services”.
Over one year, inflation nevertheless fell to 2.2%, compared to 2.3% in March.
Producer prices, the figures for which were also published on Tuesday, continued to slow down but at a slower pace than in previous months.
Prices fell by 0.2% over one month in March after a drop of 1.7% in February.
“These data show, once again, that disinflation is a slow process, especially at the end of the road towards returning to 2%,” notes Charlotte from Montpellier.
While German inflation surprised higher on Monday, markets could be concerned about the persistence of inflation in Eurozone countries.
The European Central Bank has all but committed to lowering rates at its June meeting, but members of the institution’s Governing Council are divided on the subsequent rate path.
(Written by Blandine Hénault and Corentin Chappron, edited by Jean-Stéphane Brosse and Kate Entringer)
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