If energy import prices are maintained, French GDP will be affected “by around one point in 2022”, according to a new INSEE economic note.
The INSEE teams had little time to breathe. Barely out of the Covid, they are already rediscovering the joys of forecasting under uncertainty. On Wednesday, its economists thus unveiled their new economic report, which draws an initial assessment of the first quarter of 2022 and tries to shed light on the evolution of the coming months. “The outlook for activity is darkening, warned Julien Pouget, head of the business cycle department at INSEE. But the shock is not comparable with that of the Covid in March 2020 which had caused a sudden stop in household consumption and investment.»
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INSEE thus maintains its forecast of 0.3% GDP growth in the first quarter, despite the shock of war in Ukraine and the rise in prices. In February, the year-on-year slippage in consumer prices reached 3.6%. “It would have been around 5% without the “tariff shield” on regulated gas and electricity sales tariffs“, specifies the statistical institute. In March, in a scenario where oil would stabilize around 125 dollars a barrel, inflation would exceed 4% over one year, with the explosion in energy prices explaining half of the rise. From April to June, it could peak at 4.5%.
The reversed Covid equation
Inflation is chipping away at household purchasing power, which should fall by 1.4% in the first quarter, and imply a 0.5% drop in consumption. Despite the uncertainties, the household savings rate should continue to fall between January and March in order to absorb the drop in purchasing power. Energy price hikes are also hitting business plans hard.
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The business tendency surveys, carried out between February 25 and March 14, thus reveal on first analysis a drop of 20 points in the balances of opinion of employers on the general and personal outlook for activity in industry, particularly marked in the transport sector. The Ukrainian crisis is indeed reversing the Covid equation, sparing – for the moment – services and concentrating the difficulties on industrial sites.
Unemployment stabilized
Despite this announced slowdown in industry, job prospects in the country are holding up. Insee thus expects, between January and March, a modest but positive quarter of job creation with 15,000 new salaried jobs. The unemployment rate should stabilize at the end of March at around 7.4% of the active population.
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Growth will, of course, be affected by the war in Ukraine. “If the prices of energy imports remain at the level of early March, such an increase in the cost of raw materials would affect French GDP by around one point in 2022”, detailed Olivier Simon, head of the economic summary division of INSEE. The government is still counting on growth of 4%. The Banque de France advanced on Sunday on a figure for GDP growth of 2.8% over the year, in a scenario where prices would remain permanently high.
For the moment, the growth overhang for the year 2022 at the end of the first quarter – that is to say the annual growth observed if quarterly GDP remained stable over the rest of the year – is 2 .7%…