January 2024

2024-01-10 21:29:00

No recession in France. According to the Banque de France, the French economy recorded growth of 0.2% in the fourth quarter. And escapes recession to the extent that, following a decline of 0.1% in the third quarter, France does not have two consecutive quarters of decline in GDP, which defines recession. This growth at the end of the year comes in particular from the progression of commercial services, indicates the Banque de France in its monthly economic survey (EMC). France is doing even better than expected to the extent that the Banque de France has so far anticipated growth of only 0.1% in the fourth quarter.

“This forecast is revised slightly upwards (…) due to both EMC results in December that are better than anticipated by businesses last month and a manufacturing production index up in November », Writes the Banque de France in its survey carried out among 8,500 companies.

“Activity would be driven this quarter by commercial services, thanks in particular to information-communication, accommodation and catering and business services. In the manufacturing industry, added value should rebound following the decline in the third quarter,” she adds.

What growth in 2023?

The National Institute of Statistics and Economic Studies (Insee), which expects zero growth between October and December 2023 following a decline of 0.1% in GDP in the summer, is due to publish at the end of January a first estimate of the growth in the fourth quarter. If the 0.2% expected by the Banque de France in the fourth quarter were confirmed and the growth figure for the other three quarters of 2023 was not revised, French growth for the whole year would then reach 0.9%, explained Olivier Garnier, the chief economist of the central bank. This has so far anticipated an annual increase in GDP of 0.8%, like INSEE. The government is betting on growth of 1% in 2023, following 2.5% in 2022.

The upward revision of growth for the 4th quarter results from a “ good surprise on activity in December », which progressed at a speed “a little more sustained than what was anticipated” by business leaders, according to Olivier Garnier.

The improvement may not last

The French central bank, however, warns that the small improvement may not last.

“In January, according to business expectations, activity would progress at a slower pace in industry and services, and would contract in construction,” underlines the EMC. On the positive side, on the other hand, “the opinion on the situation of order books in industry stopped deteriorating in December”, notes the Banque de France which specifies that “most sectors benefit from this dynamic, more particularly visible in aeronautics, whose order books, already high, are progressing significantly.

“In the rest of the industry, the level of notebooks is generally considered low,” she recalls, however. On the inflation front, the moderation of sales prices continues, underlines the BdF, which points to a stabilization of the prices of raw materials and a slight increase in the prices of finished products.

“As the price review period at the start of the year approaches, the proportion of business leaders planning to raise their prices in January reaches 18% in the industry, compared to 34% in January 2023,” she says.

For 2024, Bruno Le Maire indicated on Monday that growth would be positive, without giving a figure while the government had so far expected growth of 1.4%. A difficult goal to achieve. At the end of last year, the Banque de France for its part was counting on 0.9% and INSEE forecasts, which do not go beyond the first half of the year, predict a very slight growth of 0.2% in first and second trimester.

Recession likely in the euro zone

This announcement comes as the slowdown in the economy at the end of the year in the euro zone has increased the risk of a recession in the second half of 2023 and the outlook remains gloomy, a senior official from the European Central Bank (ECB) said on Wednesday. ).

“Weak indicators point to a contraction in the economy in December, confirming the possibility of a technical recession in the second half of 2023 and a weak short-term outlook,” said Luis de Guindos, vice-president of the ECB, during ‘a speech in Spain.

The GDP of the 20 euro zone countries has already fallen by 0.1% from July to September and according to him, a contraction in activity in the fourth quarter is therefore likely.

Among the main economies, Germany is experiencing a marked slowdown, penalized by the surge in energy prices, increases in interest rates and the weakening of important export markets, led by China.

“Available data indicates that the future remains uncertain and that the outlook is downward” for growth, added Luis de Guindos.

In terms of inflation, once morest which the ECB is carrying out an unprecedented tightening of its monetary policy, the downward trajectory observed for several months will continue, but less quickly, he believes.

Rate cut?

“The rapid pace of disinflation (…) is expected to slow in 2024,” according to Luis de Guindos.

Inflation fell rapidly for most of 2023 in the euro zone, but rose to 2.9% last month, mainly due to statistical effects linked to the expiration of measures taken to compensate for soaring prices Energy.

After ten consecutive interest rate increases, the ECB has left its rates unchanged since September and is aiming for a gradual return of inflation to its 2% target.

“High wage pressures, the outcome of upcoming wage negotiations and intensifying geopolitical tensions add to uncertainty regarding the future trajectory of inflation,” the official explained.

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