France’s economy grew significantly faster than estimated and inflation eased, providing a positive surprise as rising interest rates stoke recession fears in the 20-nation euro area.
(Bloomberg) — France’s economy grew significantly faster than estimated and inflation eased, providing a positive surprise as rising interest rates stoke recession fears in the 20-nation euro area.
Boosted by a surge in exports, gross domestic product in the currency bloc’s second-largest member rose 0.5% between April and June, having increased by 0.1% in the first three months of the year, the Insee statistics agency said Friday. Economists surveyed by Bloomberg had estimated expansion of 0.1%.
Consumer prices, meanwhile, rose 5% from a year ago in July — the lowest since Russia’s invasion of Ukraine triggered an energy crisis in Europe. The result is just below analyst expectations, though services inflation inched higher.
Spain’s economy, too, showed signs of resilience with growth of 0.4% that was in line with analyst estimates. While inflation unexpectedly quickened, at 2.1% it’s among the lowest levels in Europe.
Gonzalo Gortazar, chief executive officer of CaixaBank SA, Spain’s largest lender, said he’s “cautiously optimistic” about the state of the euro-zone economy, which reports second-quarter numbers on Monday.
“We are seeing stronger growth and at this stage inflation is also coming down,” Gortazar told Bloomberg TV. “Things are going clearly better than what we expected, and the expectation of a soft landing is gaining probability.”
Friday’s figures offer some cheer after European Central Bank President Christine Lagarde painted a worsening picture for the euro region over the coming months, with private-sector activity for July already pointing to a contraction.
Germany — the continent’s largest economy — is the biggest weak spot. Data due later Friday will reveal whether it managed to exit its winter recession. Economists surveyed by Bloomberg estimate output edged higher in the second quarter, though the International Monetary Fund sees it suffering the Group of Seven’s only contraction this year.
In France, Finance Minister Bruno Le Maire described the economy’s performance as “remarkable,” affirming the government’s forecast for 1% expansion in 2023.
“For the first time, growth is driven by exports and business investment much more than consumer spending,” he told French radio.
The data showed foreign sales were stoked by the delivery of a cruise ship. They also revealed a drop in consumer outlays of 0.4% as inflation, while lagging behind most of the region, remains well above the ECB’s 2% target.
“The near-term economic outlook for the euro area has deteriorated owing largely to weaker domestic demand,” Lagarde said Thursday after interest rates were lifted for the ninth time since last July. “Over time, falling inflation, rising incomes and improving supply conditions should support the recovery.”
Read more: Swedish GDP Shrinks More Than Expected, Fueling Recession Risks
As food inflation surges, French consumers have sought to cut costs, with sales of own-brand goods at Carrefour SA rising twice as fast as national brands.
“We are still in this inflationary environment with trading down, with pressure on volume, with accelerations on private label and all the new behaviors of the customer we have observed for one year,” Chief Executive Officer Alexandre Bompard said Wednesday in a presentation of Carrefour’s latest financial results.
A separate publication showed French consumer spending had begun to rebound by the end of the quarter, with a 0.9% increase in June as food purchases partially recovered.
–With assistance from Joel Rinneby, Angelina Rascouet and Ainhoa Goyeneche.
(Updates with Spain starting in fourth paragraph. An earlier version of this article corrected the day of release for German GDP in the eighth paragraph.)
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