Posted on 4/29/2022 7:51 am Updated on 4/29/2022 10:19 am
The war in Ukraine broke the momentum of economic recovery. After recovering by 7% last year, the French economy has plummeted. Between January and March 2022, the country’s gross domestic product (GDP) remained stable, according to data released this Friday morning by INSEE, which revised upwards growth by 0.1 points to 0.8% in the last quarter of 2021.
In mid-March, the statistics institute maintained its forecast for growth of 0.3% in the first quarter. The more optimistic Banque de France halved its forecast to +0.25% two weeks ago.
“disappointment”
The Omicron variant at the very beginning of the year, then the shock of the Russian invasion of Ukraine and stronger than expected inflation – at 4.5% in March – ended up having a stronger than expected impact. “Zero growth is a disappointment,” says Sylvain Bersinger, economist at Asterès.
Manufacturing of goods and services slowed, rising just 0.5% in the first quarter, compared with 1% in the previous three months. In particular, the main driver of French growth has continued: Household consumption fell by 1.3% in the first quarter. The return of Omicron-related health restrictions earlier in the year reduced spending on room and board and clothing.
In March alone, purchases of goods also fell by 1.3% in terms of volume. In the face of strong price increases, households reduced their food expenditure by 2.5% and their energy expenditure by 1.6%.
Inflation weighs on the morale of the French, who fear a loss of purchasing power and adjust their spending. After a sharp decline in March, the household confidence indicator measured by Insee also fell well below its long-term average in April at 88 and thus approached the level reached at the end of 2018 at the time of the “yellow vest” crisis.
foreign trade, the good surprise
Since February 24, the effects of the war in Ukraine have been spreading through three channels: energy, rising prices and confidence. Added to this is the return of exit restrictions in China, which are disrupting supply chains. However, with order books well filled, business leaders remain optimistic about their prospects. Investments by non-financial corporations increased by 0.7%.
The pleasant surprise also comes from foreign trade. Although affected by the global economic slowdown, French exports grew faster than imports, rising 1.5% versus 1.1%.