France’s financial system unexpectedly expanded barely within the remaining quarter of 2022, signalling the eurozone’s second-largest financial system is ready to keep away from falling into recession.

The financial system grew by 0.1 per cent between the third and fourth quarters, the nationwide statistics bureau Insee mentioned on Tuesday. Whereas that was beneath the 0.2 per cent enlargement recorded over the earlier quarter, it was a slight enchancment on forecasts of no change recorded by Reuters.

The French determine comes after Germany reported a fourth-quarter contraction of 0.2 per cent on Monday, putting the eurozone’s largest financial system getting ready to recession. Eurozone figures out later in the present day are anticipated to point out the area’s financial system shrank by 0.1 per cent.

Finance minister Bruno Le Maire mentioned the French development was “a testomony to the robust rebound of our financial system after the Covid shock and its resilience within the face of the power disaster”.

France’s financial system is now 1.2 per cent bigger than earlier than the coronavirus pandemic — a stronger restoration than Germany’s.

Le Maire mentioned the French financial system would proceed to develop all through 2023. “The resilience of our entrepreneurs and staff is outstanding. Let’s stick with it!”

Nonetheless, Charlotte de Montpellier, senior economist on the financial institution ING, mentioned this yr can be “characterised by near-stagnation” of France’s financial system.

International commerce drove French development in the course of the fourth quarter as imports fell sharply, reflecting weakening demand. Funding additionally expanded, however family consumption fell by 0.9 per cent as larger power prices hit family funds. Spending on meals fell for the fourth consecutive quarter, whereas spending on power plunged 5.5 per cent, reflecting gentle climate and efforts to scale back consumption.

The financial system grew 2.6 per cent in 2022, reflecting a rebound in exercise because the pandemic receded.

Separate information additionally printed on Tuesday confirmed French inflation accelerated within the yr to January. The preliminary harmonised annual inflation fee rose to 7 per cent, up from 6.7 per cent within the earlier month, reflecting sharper worth development for power and meals.

Whereas French inflation has been decrease than elsewhere in Europe because of authorities programmes to cap power costs, economists anticipate worth development to fall extra slowly right here this yr.

Riccardo Marcelli Fabiani, economist at Oxford Economics, a analysis firm, mentioned: “The federal government is prone to restrict the autumn in retail costs because it unwinds family assist and phases out different measures attributable to their excessive prices.”

Separate information printed on Tuesday confirmed German retail gross sales fell sharply in December and recorded the most important contraction since data started in 1994 for meals gross sales, reflecting the impression of upper costs.

Further reporting by Daria Mosolova in London and Leila Abboud in Paris

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