French Economy Unexpectedly Contracts

In France, according to the results of the third quarter of this year, the economy contracted, which came as a surprise to analysts who predicted a positive situation.

French Economy Unexpectedly Contracts

At the same time, in November, the dynamic of inflation slowed down in the mentioned country. In this case, analysts’ expectations also did not coincide with reality, but in a positive sense. The intensity of the decline in the cost of goods and services in France turned out to be faster than experts predicted. Against this background, investors step up due to expectations that the European Central Bank will lower interest rates in the spring of 2024.

In the third quarter of this year, the gross domestic product in France showed a minimal decrease of 0.1% compared to the period from April to June. Analysts expected this indicator to grow by 0.1%.

The inflation rate in France in November was 3.8%. These data were published by French statistics agency Insee. This indicator is the lowest since the beginning of this year. In October, the inflation rate in France was 4.5%. Analysts had expected this figure to be more than 4% in November.

Currently, there is a tendency across Europe to weaken the dynamic of the growth in the cost of goods and services. At the same time, the region continues to be on the verge of recession. Money market traders expect the European Central Bank to decide on an interest rate cut in April next year. Officials believe that this figure will be reduced later.

The GDP indicator in France indicates weaker growth in the eurozone. Analysts expected a more positive dynamic. The French and German economies, which are the largest in the eurozone, are in a difficult situation. The Bundesbank says Germany is facing a recession.

The decline in the rate of inflation after its largest jump in the euro era strengthens the confidence of expectations that the European Central Bank will soon abandon the policy of raising rates. At the same time, officials warn that no one plans to rush into this issue.

The process of reducing inflation in France is characterized by a lower degree of intensity compared to the dynamic of this process in other European countries. According to experts, this is because the local government has partially lifted restrictions on electricity costs.

In November, in France, inflation in the sphere of services was fixed at 2.7%. In October, this indicator was equal to 3.2%. The increase in prices for industrial goods in France in November was 1.9%. A month earlier, this indicator was fixed at 2.2%.

Economist Eleonora Mavroeidi says that a faster decline in inflation than expected indicates a rapid reduction in underlying price pressures in France. According to her, in this case, the European Central Bank will be more confident in reducing the intensity of the inflationary process and its ability to keep rates down.

The indicator of consumer spending in November in France decreased by 0.9% compared to October. At the same time, economists predicted that in this case, the drop would be 0.2%.

French Finance Minister Bruno Le Maire considers the government’s forecast that the GDP will grow to 1.4% in 2024 to be justified. Also, in his opinion, in 2024 and 2025, inflation will decrease and interest rates will stabilize.

As we have reported earlier, German Budget Crisis Worsens.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.