The decline in household consumption is even more marked than had been estimated.
Gross domestic product (GDP) finally contracted by 0.2% in the first quarter in France, INSEE said on Tuesday, revising downwards its first estimate of 0% growth published at the end of April. The decline in household consumption is notably even more marked than previously estimated by the National Institute of Statistics, with household purchasing power having fallenclearlyby 1.9% in the first quarter, weighed down by inflation.
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After its rebound in 2021, with growth of 6.8% (also revised downwards on Tuesday by INSEE), the French economy therefore relapsed at the start of 2022, penalized both by the Omicron variant and by the repercussions of the war in Ukraine, the main one being soaring prices. Inflation accelerated further in May to 5.2%, after reaching 4.8% in April, exceeding the 5% mark for the first time since September 1985. From now on, the growth overhang at the end of the first quarter (i.e. the growth that we would obtain in 2022 if the economy stagnated for the rest of the year) is only 1.9%, against 2.4% estimated so far by INSEE. At this stage, INSEE expects growth of 0.25% in the second quarter, and the Banque de France of 0.2%. While household consumption is traditionally the engine of French growth, it was clearly struggling in the first quarter (-1.5%, against -1.3% estimated previously) with households showing their concern about the inflation.
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In the first quarter, their purchasing power thus contracted by 1.9%, more than the -1.5% forecast by INSEE, even if this drop partly reflects the effect of comparison of the payment of I”inflation allowanceaccounted for in the fourth quarter of 2021. The new government has put the subject at the top of the pile of its priorities, but the measures promised (food vouchers, reindexing of pensions and social minima, etc.) will have to wait for the result of the legislative elections in June and the constitution of a new National Assembly to ratify them. While employment and wages continued to grow in the first quarter, the pace slowed compared to the last quarter of last year, also notes INSEE, which points out that the number of hours worked fell by 0 .3%, a consequence of sick leave linked to the Covid-19 epidemic.
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