Inflation climbs to 4.8% in April, French growth is sluggish in the first quarter

Inflation climbs to 4.8% in April, French growth is sluggish in the first quarter

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Undermined by the Omicron wave at the beginning of the year, and by the war in Ukraine in late February, French growth remained completely sluggish in the first quarter: gross domestic product (GDP) grew by 0% over the period , after the last quarter of 2021 at + 0.8%, according to data published on Friday 29 April by INSEE. The recession in the French economy is clearer than expected: the statistical office expected weak growth, around 0.3%.

At the same time, inflation continued to rise: Consumer prices rose 4.8% year-on-year in April, from 4.5% at the end of March. The harmonized price index, which allows comparison with other eurozone countries, increased by 5.4% over a year, while it increased by 5.1% in March. On Thursday, April 28, inflation had reached 7.4% in Germany, a record level since reunification in 1990.

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“The decline in consumption is greater than expected, which causes stagnation of overall activityexplains Julien Pouget, Director of Financial Conditions at INSEE. We have the combination of two external shocks: Covid, with the Omicron wave in January, which burdened housing and catering, and the war in Ukraine, which boosted inflation. »

Growth throughout the year is on the horizon “soft”, says Mr. Pouze. You should, after all, take advantage of a strong one “get a result”, explains Mr. Pouze, given the good recovery of the last months, which followed the weakness of the activity at the beginning of 2021. the activity was zero for the rest of the year. However, it could be lower than this percentage if activity was negative in one or more quarters.

“Loss of purchasing power”

April data show that price increases are changing character. Focused first on energy, this “imported” inflation is now transmitted to all types of consumption, especially food and processed products. Negotiations earlier this year between producers and distributors also contributed to rising food prices. “We can imagine that we will have a significant rise in the underlying inflation [c’est-à-dire hors énergie]»Mr. Pouze continues.

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The impact of this price increase on purchasing power has contributed to a significant slowdown in consumption, the engine of the French economy. In March, the latter plunged 1.3%, with households reducing their food purchases by 2.5% and energy consumption by 1.6%. Overall, the decline in food markets explains almost 40% of the decline in consumption. The French also significantly reduced their spending on hotels and restaurants: after recovering 0.9% at the end of 2021, the decline reached 5.3% this quarter. The markets for textiles, processed goods, transport and leisure services are also declining.

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