Banque de France revises its growth forecast for late 2023

The French economy should escape recession with growth of 0.2% in Q4 2023. According to the Banque de France, this is due to growth in market services.

Business activity driven by market services and manufacturing industry

The end of 2023 will finally be better than expected. The Banque de France's latest economic outlook forecasts a rise in GDP of close to 0.2% for the 4th quarter of the year, marking a 0.9% increase over 12 months without any revision of previous quarters.

" This forecast has been revised slightly upwards (...) due to both EMC results in December that were better than anticipated by companies last month and a higher manufacturing production index in November," says the Banque de France.

In mid-December, INSEE was more pessimistic, predicting a stagnation in GDP over the last three months of the year. In its "note de conjoncture", the Institut national de la statistique et des études économiques (INSEE) forecast a 0.8% increase in economic activity for the year as a whole, while the government was hoping for 1% growth after 2.5% in 2022.

Finally, between October and December 2023, activity was mainly driven by market services (accommodation and catering, information and communication, business services) and industry (particularly chemicals, pharmaceuticals, automotive and metallurgy).

In its monthly business survey, conducted between December 20 and January 5 among 8,500 business leaders, the central bank reports that their value added has rebounded from the third-quarter decline. This was not the case, however, for value added in the construction sector, which is said to have fallen again, with a sharp drop in housing starts.


A more mixed outlook for January 2024

While services and manufacturing provided the good news at the end of 2023, the outlook for January 2024 is more mixed. Business leaders anticipate "a slower pace" in these sectors, and a contraction in construction activity.

At the same time, the slowdown in inflation is set to continue, with only 18% of manufacturers forecasting price rises in January 2024 (versus 34% in January 2023). Of all these players, 9% are announcing price cuts. This proportion is more marked in the agri-food sector (12%). More specifically, the Banque de France points to a stabilization of raw material prices and a slight increase in finished product prices.

As for the recruitment difficulties encountered by professionals, the situation could improve this year. 41% of companies are struggling to hire, compared to 52% a year ago.