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French growth resisted this summer, inflation mortgages the end of the year

In line with the forecasts of the National Institute of Statistics and slightly lower than those of the Banque de France (0.

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French growth resisted this summer, inflation mortgages the end of the year

In line with the forecasts of the National Institute of Statistics and slightly lower than those of the Banque de France (0.25%), growth benefited from a slight increase in the production of services (0.5%), in decline, however, compared to that of spring (1%).

“As it is above all a question of reducing production arrears, it is difficult to characterize the economic performance of the third quarter as very solid”, judge in a note Charlotte de Montpellier, economist at ING.

The last three months of the year should be more difficult, with zero growth expected in the 4th quarter by INSEE, which forecasts a rate of 2.6% for the whole of 2022 (0.1 point below the government estimate).

The third quarter "is the last hurrah before the entry into recession", slice Maxime Darmet, economist specializing in France at Allianz Trade, even if "France's neighbors are doing much worse".

Inflation, which picked up sharply to 6.2% year on year after slowing in August and September, has already started to compress the wallets of the French.

With prices appreciating at an unprecedented speed since the mid-1980s, households "feel the drop in their purchasing power hard", says Maxime Darmet.

Data for the third quarter are not yet available but INSEE has already recorded a decline in purchasing power in the first half.

The indicator which summarizes the loss of individual purchasing power (“gross disposable income per consumption unit”) thus fell by 1.8% in the first quarter and by 1.2% in the second.

What pushes households to save: INSEE predicts an increase in the savings rate by the end of the year (17% against 15.5% in the first half).

Household consumption expenditure on accommodation and food services has already started to shrivel up this summer, falling from 12.7% in the 2nd quarter to just 0.6% over the period from July to September.

- End of euphoria -

The two sectors, however, traditionally benefit from the influx of tourists in the heart of summer and had benefited from exceptional household spending in the spring after two years of the pandemic.

“The post-Covid euphoria is over when it comes to spending on services,” comments Mr. Darmet.

"In the spring, we (households) had not yet noticed the very sharp rise in energy" and consumers had "cash reserves", he explains to AFP.

"During the summer, we realized that things were not improving and that gas and electricity prices" continued to rise, which may have encouraged the French to moderate their consumption.

Goods and services combined, household consumption, the usual driver of the French economy, therefore stagnated in the third quarter (0.0% after 0.3%).

In detail, energy consumption remains well oriented (0.6%) unlike food consumption, down 1.6% over the quarter, with food prices continuing to rise in recent months and forcing consumers to tighten their belts.

On the corporate side, however, investment remains encouraging and is even progressing compared to the spring.

“It is not surprising insofar as companies anticipate more difficult times in the fourth quarter and therefore take advantage of favorable financing conditions” before they harden, deciphers Mr. Darmet.

"The contribution of foreign trade is negative this quarter (-0.5 point, after 0.0 point in the two previous quarters)", adds INSEE, due to weaker expansion in exports (0.7%) than imports (2.2%).

The decline in exports is particularly marked in services (-0.4% after 3.3% in the spring).

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