French economy contracted in Q3, inflation eased further

A sign reading “Anti-inflation challenge, third price cut on more than 500 new products” is seen as customers shop at a Carrefour supermarket in Montesson near Paris, France, Sept 13, 2023. REUTERS/Sarah Meyssonnier/File photo

PARIS  -The French economy contracted by 0.1 percent in the third quarter of the year, revised data from the statistics office INSEE showed on Thursday, while November inflation eased more than expected.

The contribution of gross fixed capital formation, which indicates how much of the new value added in an economy is invested rather than consumed, to France’s national output was revised considerably downwards, while the contribution of domestic demand also slowed to 0.2 points, INSEE said.

The stats office said the contribution of external trade, at -0.4 points, had also negatively impacted gross domestic product (GDP) during the third quarter, as imports grew.

In November, the EU-harmonized preliminary inflation came to 3.8 percent year-on-year, below a Reuters poll of 19 economists, which had predicted a figure of 4.1 percent. The inflation was down from 4.5 percent in October, helped by easing price pressure in energy and in the services sector.

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Food prices rose 7.6 percent in November, versus 7.8 percent in October while the increase in energy prices slowed to 3.1 percent after seeing an increase of 5.2 percent last month.

Month-on-month, prices declined by 0.2 percent as falling transportation and energy prices offset a month-on-month rise of food prices, especially fresh produce.

Despite the unexpected economic contraction, the government kept its 1 percent growth forecast for 2023.

“I maintain my growth forecasts. We will have positive growth this year and higher growth in 2024 than in 2023,” Economy Minister Bruno Le Maire said on French radio, adding that he was sticking with his forecast of 1.4 percent growth next year.