France: Economy grows at softest pace since Q1 2022 in Q4 2022
According to a preliminary reading, GDP growth edged down to 0.1% on a seasonally adjusted quarter-on-quarter basis in the final quarter of last year, from 0.2% in the third quarter. Q4’s reading marked the worst result since Q1 2022.
The downturn was driven by weakening private consumption and exports, compounded by softer fixed investment growth. Household spending contracted 0.9% in Q4, marking the worst result since Q1 2022 (Q3: +0.5% s.a. qoq), while fixed investment growth softened to 0.8% in Q4, from 2.3% logged in the previous quarter. Meanwhile, government spending was stable at a 0.2% expansion in Q4 (Q3: +0.2% s.a. qoq).
On the external front, exports contracted 0.3% in Q4, marking the worst reading since Q1 2021 (Q3: +0.8% s.a. qoq). In addition, imports deteriorated, contracting 1.9% in Q4 (Q3: +3.9% s.a. qoq), marking the worst performance in over two years.
On an annual basis, economic growth waned to 0.5% in Q4, compared to the previous quarter’s 1.0% increase. Q4’s reading marked the slowest growth since Q4 2020.
Commenting on the print, Tullia Bucco, economist at UniCredit Bank, noted that:
“Today’s reading brings encouraging news as it confirms the economy’s resilience against the headwinds weighing on the outlook. Looking ahead, while weakness in economic activity remained largely widespread, the latest PMI data for January indicated that the economy continued to hold up at the beginning of the year, with businesses viewing the current soft patch as short-lived and expecting demand conditions to recover.”
On the outlook, Charlotte de Montpellier, senior economist at ING, highlighted that:
“Looking ahead, the data suggest that the French economic outlook remains uncertain, but far from dramatic. It doesn’t seem on the verge of recession. Nevertheless, escaping the recession does not mean rebounding strongly. […] To see a significant improvement in the outlook for the French economy in 2023, the fall in the price of gas on international markets and the reopening of China will not be enough. There needs to be a clear improvement in household and business confidence. Without this, stagnation remains the most likely scenario for 2023.”