THE FIGURE OF THE WEEK. More and more economists believe that France will have difficulty escaping a recession. Stagflation threatens.
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According to INSEE, France's GDP finally fell by 0.2% in the first quarter, against 0% initially estimated, mainly due to the marked drop in household consumption (-1.5%), particularly in the transport equipment sector (-2.3%) and the accommodation and catering sector (-3.9%). Inflation, which reached 5.2% in May over one year, a level not seen since 1985, weighs heavily on the purchasing power of the French, which has posted a sharp drop of 1.9% over the three first months of the year.
In view of the very recent statistics available for the months of April and May (car sales, household morale, etc.), more and more economists believe that France will have difficulty escaping a recession, technically defined as two consecutive quarters of decline in GDP. Suffice to say that the 4% growth assumption on which the finance law for 2022 had been built already appears totally out of reach. Experts from the French Observatory of Economic Conditions (OFCE) now only anticipate an increase in GDP limited to 2.7%, others are even more pessimistic and do not see growth exceeding 2%.
The dreaded worst-case scenario of stagflation, combining soaring prices and stagnating economic activity, which marked the end of the 1970s following the oil shocks, seems to be set in motion, with the social risk that the deterioration in the financial situation of companies will quickly result in plans for massive layoffs and a marked deterioration in the job market. From May 1974 to October 1975, the number of unemployed more than doubled in France, from 400,000 to 900,000.