Economic growth accelerated slightly in April, but inflation slowed

Will the continued decline in French inflation allow the French economy to restart? Even if it is small for now, the first signs seem to point in that direction. Inflation slowed further in April to 2.2% for the year, down from 2.3% in March, compared with 5.9% in April 2023, according to preliminary INSEE data.

A slight decrease, due to a slowdown in prices for food (+1.2% for the year, after +1.7% in March), tobacco (+9% after +10.7%), as well as a slight decrease in prices for industrial goods (-0.1% after +0.1%), in contrast to energy prices, which accelerated (+3.8% after +3.4%).

Even if these price increases continue to weigh on household purchasing power in the first quarter, France’s gross domestic product (GDP) nevertheless increased by 0.2%, thanks in part to household consumption as well as corporate investment, according to INSEE. .

This estimate is better than previously announced. INSEE initially expected zero growth between January and March, following growth of 0.1% of GDP in the last quarter of 2023.

Bruno Le Maire welcomes

Bruno Le Maire on Tuesday welcomed the result as a sign of the “solidity” of the country’s economy. “To anyone who wants to believe that our economy is at a standstill: the facts are stubborn. France’s growth is progressing. “This is a new sign that reflects the strength of our economy.”

And the Minister of Economy added: “The government’s strategy is bearing fruit.” For reference, the government is targeting growth of 1% in 2024, although many economic analysts are betting higher than 0.5%.

In the first three months of the year, economic activity benefited from acceleration in household consumption, the main driver of growth, which increased 0.4% from 0.2% in the previous quarter.

Return to spending on food

If demand for services is still strong, the change is driven by the return of spending, especially on food, whereas this item was ignored after the sharp increase in some products on the shelves of supermarkets and hypermarkets. The return of households to shops should be confirmed over the next quarter, experts say.

However, this relatively good growth news shouldn’t make us forget the thorns that are still undermining the French economy, starting with the deficit falling to 5.5% of GDP in 2023, down from 4.9%.

If the government intends to get back on track after falling below the 3% GDP threshold in 2027, many doubt it. And even if ratings agencies have for now maintained their ratings on France’s ability to pay off its debt, they are not confident about this return to a green economy. The first chairman of the Court of Auditors, Pierre Moscovici, said on Franceinfo on Monday that the deficit reduction trajectory “as presented lacked credibility and consistency.”

However, such a situation, when the government seeks to save (10 billion has already been announced, and a reduction of 10 billion will be made in 2024), simply risks disrupting the dynamics of the beginning of growth. OFCE estimates that the first 10 billion in savings should already reduce annual growth by 0.2 points.