Another increase expected in June, but a difficult winter ahead
This increase in manufacturing output is good news for the French economy and is likely to continue in June. Indeed, the business climate indicator shows a recovery in June, thanks in particular to an improvement in business leaders' assessments of their recent production. In addition, supply chain difficulties seem to have eased somewhat in June, although they remain at a high level. Nevertheless, even if a rise is expected in June, it is unlikely to be enough to push manufacturing output up quarter-on-quarter in the second quarter, given the low level in April. We therefore believe that manufacturing output will contribute negatively to GDP growth in the second quarter. Other elements could make a positive contribution to GDP growth, notably services, which could help narrowly avoid a further contraction of GDP in 2Q.
While there is still a chance that the French economy will escape recession in the spring of 2022, the outlook for the winter of 2022-23 is much bleaker. The slowdown in global demand could weigh more and more heavily on the industry. In addition, domestic demand is increasingly weakening in the context of uncertainty, high inflation and declining real incomes. Possible gas shortages could also weigh heavily on French industry, and thus on the whole economy. Taking all these factors into account, we expect GDP to contract in the fourth quarter of 2022, as well as in the first quarter of 2023, before a very gradual recovery. This implies that, after an expected GDP growth of around 2.1% on average over the year 2022, growth could be close to 0% over the whole of 2023 (we currently expect 0.3%).
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