Overall, this report is not good and points to an even sharper slowdown in industrial momentum, as business surveys suggest. August retail sales data released yesterday by Eurostat are no more encouraging. Retail sales in volume terms fell 2.8% in August in France, after a 0.3% drop in July.
This means that the two activity indicators available at this point for August point to a weakening of the French economy in the third quarter. As we know, the summer tourist season was quite good, so service consumption was probably strong during that period. However, the data available so far has been disappointing and confidence indicators point to further weakening in September. In this context, the risks of negative GDP growth in the third quarter have increased.
At this stage, it is difficult to identify factors that could lead to a rebound in activity in the fourth quarter, or early 2024. Inflation remains and recent increases in energy prices are affecting household purchasing power. At the moment, there are no signs that wage increases or labor market resilience are leading to a recovery in consumption. High interest rates continue to discourage investment by households and businesses, and the recent rise in long-term interest rates has further undermined the fiscal environment. Global economic growth has slowed in recent months, which will likely affect exports. French economic growth over the next few quarters is therefore likely to be weak. We expect growth of 0.8% in 2023 and 0.6% in 2024, a figure much lower than that assumed by the government for the 2024 budget (1.4%).