France’s economy unexpectedly expanded slightly in the final quarter of 2022, signalling the eurozone’s second-largest economy is set to avoid falling into recession.
The economy grew by 0.1 per cent between the third and fourth quarters, the national statistics bureau Insee said on Tuesday. While that was below the 0.2 per cent expansion recorded over the previous quarter, it was a slight improvement on forecasts of no change recorded by Reuters.
The French figure comes after Germany reported a fourth-quarter contraction of 0.2 per cent on Monday, placing the eurozone’s largest economy on the brink of recession. Eurozone figures out later today are expected to show the region’s economy shrank by 0.1 per cent.
Finance minister Bruno Le Maire said the French growth was “a testament to the strong rebound of our economy after the Covid shock and its resilience in the face of the energy crisis”.
France’s economy is now 1.2 per cent larger than before the coronavirus pandemic — a stronger recovery than Germany’s.
Le Maire said the French economy would continue to grow throughout 2023. “The resilience of our entrepreneurs and employees is exceptional. Let’s keep it up!”
However, Charlotte de Montpellier, senior economist at the bank ING, said this year would be “characterised by near-stagnation” of France’s economy.
Foreign trade drove French growth during the fourth quarter as imports fell sharply, reflecting weakening demand. Investment also expanded, but household consumption fell by 0.9 per cent as higher energy costs hit household finances. Spending on food fell for the fourth consecutive quarter, while spending on energy plunged 5.5 per cent, reflecting mild weather and efforts to reduce consumption.
The economy grew 2.6 per cent in 2022, reflecting a rebound in activity as the pandemic receded.
Separate data also published on Tuesday showed French inflation accelerated in the year to January. The preliminary harmonised annual inflation rate rose to 7 per cent, up from 6.7 per cent in the previous month, reflecting sharper price growth for energy and food.
While French inflation has been lower than elsewhere in Europe thanks to government programmes to cap energy prices, economists expect price growth to fall more slowly here this year.
Riccardo Marcelli Fabiani, economist at Oxford Economics, a research company, said: “The government is likely to limit the fall in retail prices as it unwinds household support and phases out other measures due to their high costs.”
Separate data published on Tuesday showed German retail sales fell sharply in December and recorded the largest contraction since records began in 1994 for food sales, reflecting the impact of higher prices.
Additional reporting by Daria Mosolova in London and Leila Abboud in Paris
