The French economy fared rather better than expected at the start of the year. While the French National Institute for Statistics and Economic Studies (INSEE) was expecting a sluggish first quarter, gross domestic product (GDP) grew by 0.2% over this period, according to data published on Tuesday, April 30. This figure "reflects the solidity of the economy," Economy Minister Bruno Le Maire quickly reacted. He forecasts growth of 1% in 2024.

Nicolas Carnot, INSEE's director of economic studies and synthesis, pointed out that this target is not unrealistic in view of the data published on Tuesday. The growth rate achieved already stands at 0.5%, the figure that would be reached at the end of the year if the next three quarters were sluggish. The Banque de France, which is forecasting slightly lower growth of 0.8% for the year, considers this figure of 0.2% to be "consistent" with its forecast.

Accounting for half of GDP, household consumption is the main driver of activity and it is showing signs of a revival. It rose by 0.4% between January and March, a change in trend after two years of sluggishness. The slowdown in prices is undoubtedly a contributing factor: In April, inflation stood at 2.2%, compared with 5.9% in April 2023, INSEE also reported. Food prices, in particular, have seen a clear slowdown. The double-digit rises of 2023 are now in the past: Over one year, the increase was just 1.2%. Fresh produce, in particular, is even down by 0.7%. It is now energy (+3.8%) and services (+3%) prices that have risen the most over 12 months.

Opportunity purchases

As a result, food consumption rose by 0.5% in the first quarter, after plunging by 4.8% in 2023. Purchases of manufactured goods remain more moderate (+ 0.1%) and, above all, large purchases such as automobiles were down by 3.5%. This decline was doubtless linked to end-of-year promotions and the end of green bonuses, which prompted opportunity purchases at the end of 2023. Consumption of services (+ 0.7%), on the other hand, was buoyant, particularly accommodation and catering, up by 1.5% over the first three months of the year, and transport services by 2.1%.

In the second quarter, significant price cuts on certain manufactured goods could boost consumption, especially as the volume of French savings remains particularly high. "This is where we have the most potential for a rebound," pointed out Mathieu Plane, economist at the French Observatory of Economic Conjunctures. Purchasing power, meanwhile, looks set to regain a little momentum, thanks to the revaluation of pensions and social benefits at the start of the year, and wage increases that should outstrip inflation during 2024.

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