French financial system ekes out meagre development in Q3, inflation hits document excessive By Reuters

By Richard Lough

PARIS (Reuters) – France’s financial system eked out meagre development within the third quarter as family spending stagnated and a pointy bounce in inflation in October signalled headwinds looming within the ultimate quarter of the yr.

France’s financial system grew 0.2% within the July-September interval, in keeping with market expectations, preliminary information from the INSEE official statistics company confirmed.

Stubbornly excessive inflation, export weak point and dangers to power provide will weigh on the euro zone’s second largest financial system within the months forward, analysts mentioned, simply because the European Central Financial institution jacks up charges to tame worth rises.

Financial institution of France Governor Francois Villeroy de Galhau mentioned he noticed no purpose to revise downwards his forecast for two.6% GDP development in 2022 however that there have been clear indicators of weak point within the eurozone as a complete.

“Meaning resilient development this yr and not less than a major slowdown subsequent yr,” Villeroy informed a webcast hosted by monetary web site Boursorama.

Villeroy, who can also be a European Central Financial institution member, mentioned “substantial” progress had already been made within the ECB’s bid to struggle off a historic surge in inflation.

France has fared higher than its neighbours in taming worth rises thanks partially to early power worth caps and gas subsidies, however economists have warned that its heavy spending on blanket safety for households is storing up ache for later.

After two consecutive months of slowing inflation in France that bucked the broader euro zone development, client costs surged in October. Meals costs had been up 11.8% yearly whereas power costs soared 19.2%.

On an EU-harmonised foundation, inflation rose 1.3% month-on-month, leaving the year-on-year price at 7.1% — practically a full level increased than in September and surpassing a document excessive for France of 6.8% for hit in July.

The information got here a day after the European Central Financial institution raised rates of interest once more, nervous that fast worth development is changing into entrenched. It lifted its deposit price by an additional 75 foundation factors to 1.5% – the best price since 2009.

The outlook for France, remained tough with inventories more likely to make a unfavorable contribution to development from the following quarter, ING analysts mentioned.

“With funding at half-mast, dangers to power provide, persistently excessive inflation and an total slowdown in demand for exports, it’s tough to count on a robust restoration in development within the second half of 2023,” ING mentioned.

French President Emmanuel Macron this month in a newspaper interview cautioned policymakers in opposition to “demand destruction”.

ECB President Christine Lagarde on Thursday pushed again on political criticism that fast price hikes threatened to push the euro zone into recession, arguing that her job was to get inflation underneath management.