France's economy showed signs of weakening in the third quarter (Q3) of 2023, with a slight decrease in its gross domestic product (GDP) of 0.1 per cent, following a notable increase of 0.6 per cent in the second quarter (Q2), according to the National Institute of Statistics and Economic Studies (Insee). The detailed quarterly accounts released recently highlight the contrasting dynamics within the economy: a rebound in household consumption but a slowdown in corporate investment and a decline in foreign trade, which collectively hindered GDP growth.

The manufacturing industry witnessed a marginal decrease in activity. Despite improvements in supply chain issues, significant hiring challenges persist, and demand-side difficulties, particularly in the industrial sector, are on the rise.

Looking ahead to the fourth quarter (Q4) of 2023, GDP is projected to remain stable with a 0.0 per cent growth forecast. The manufacturing industry is expected to see a slight recovery following its decline in Q3. However, energy production, particularly electricity, is anticipated to fall, primarily due to the mild autumn weather, as per Insee.

In terms of demand, household consumption is expected to remain steady in Q4 2023. Corporate investment, however, might face a downturn, especially in the goods sector, influenced by rising interest rates.

The first half (H1) of 2024 shows more promise, with an anticipated acceleration in activity (0.2 per cent forecast per quarter). This optimism is driven by expected disinflation despite high interest rates. Industry, especially energy production, is likely to rebound, supporting this growth. Household consumption is also set to increase as inflation eases. Moreover, a surge in imports is forecasted, stimulated by growing domestic demand, while exports will largely depend on external demand.

The overall annual growth for 2023 is projected to be 0.8 per cent, a slowdown from the 2.5 per cent in 2022. The growth overhang for mid-2024 is predicted to be modest at 0.5 per cent. However, the economic outlook remains cautious, with potential risks like new geopolitical tensions and fluctuating oil prices. Conversely, a slowdown in inflation and a possible decrease in the high household savings ratio could positively impact growth.

Fibre2Fashion News Desk (DP)

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