France’s economic system suffered a pointy slowdown within the first quarter with no development from the earlier three months, undershooting economists’ expectations and elevating the spectre of stagflation within the eurozone.
The principle drag on French development was a fall in family spending, indicating that larger meals and vitality costs and the fallout from the Ukraine warfare are taking their toll on retail spending and client confidence.
New worth knowledge on Friday confirmed French inflation rose to five.4 per cent in April from 5.1 per cent the earlier month, the best degree for the reason that knowledge collection started in 1997.
Economists mentioned client spending was additionally weighed down by Covid restrictions because the nation solely lifted the majority of its coronavirus controls in mid-March, together with the requirement to point out a vaccine cross to enter many indoor venues.
The disappointing development determine brings a latest run of French financial outperformance to a halt, regardless of the eurozone’s second-largest economic system benefiting from a extra beneficiant pre-election fiscal stimulus and decrease inflation than a lot of its eurozone neighbours.
The flatlining of French gross home product within the first quarter marks a pointy slowdown from the upwardly revised 0.8 per cent development fee within the remaining three months of final yr. Economists polled by Reuters had on common forecast first-quarter development of 0.3 per cent.
The French nationwide statistics workplace mentioned on Friday that output was hit by a 1.3 per cent fall in family spending, which offset a 0.2 per cent enhance in funding, whereas modifications in inventories added 0.4 proportion factors to development and commerce contributed 0.1 factors.
Jessica Hinds, an economist at Capital Economics, mentioned that whereas this yr’s fall in French client spending was “partly attributable to Covid restrictions firstly of the quarter, it additionally displays rising costs associated to the Ukraine warfare,” including: “The latter is more likely to persist, and can put further strain on newly re-elected [president] Emmanuel Macron to offer extra assist to households.”
France’s underwhelming begin to the yr indicated the eurozone was more likely to develop at a weaker than anticipated fee within the first quarter. Eurozone quarterly GDP knowledge are attributable to be printed on Friday and economists on common count on development to be steady at 0.3 per cent.
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