The French summer will start with weak growth and stronger inflation

The French summer will start with weak growth and stronger inflation

Over the next two months French inflation will quicken while economic growth will be “modest,” the Insee statistics agency said. Adding to European concerns on the extent of the economic damage from Russia’s war in Ukraine.

After stagnating in the first quarter of 2022, Insee forecasts gross domestic product will inch up about 0.25% in the second. It noted “significant” risks to that “modest” outlook — including a possible worsening of energy-supply tensions and a slowdown in China due to Covid-19 lockdowns.

Consumer prices are expected to jump 5.4% from a year ago in June — the sharpest increase since 1985 — as surges in agricultural and industrial prices feed through to households.

The bleak short-term outlook for the euro area’s second-largest economy complicates the task of policy makers seeking to tame prices without hurting the economy excessively. At the European Central Bank, even as support builds to increase interest rates from record lows, some officials warn of the risk of the economy grinding to a halt.

“It could be a question,” he said. “But we don’t have a forecast beyond mid-year.”

It’s too soon to say whether France is experiencing stagflation as this is usually defined over a longer period, according to Insee economist Julien Pouget.

Either way, households are suffering less than their European peers from soaring prices after the government stepped in with about 25 billion euros ($26.3 billion) of measures including capping energy costs. Insee estimates inflation would be about two percentage points faster without the support.

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