In 2023, global economies evolved in different ways, with US growth reaching +2.5% compared to +0.5% in the Eurozone, where activity has been at a standstill overall since the end of 2022. Europe remains exposed to high energy prices, although these are now falling, and is also suffering the effects of tightening monetary policies. The US economy has been less affected by this phenomenon, having benefited from some powerful public support measures. In China, after the rebound following the reopening of the economy, growth stabilised at a significantly lower rate than that in the 2010s, penalised mainly by the contraction in the real estate sector. However, the effect of this Chinese slowdown is somewhat ambiguous overall for the French economy: although it is slowing down activity via the trade channels, it is nevertheless contributing to a relaxing of commodity prices and is thus a supporting factor.

These short-term variations are expected to continue into early 2024. The past increase in interest rates is hampering all investment, by households and businesses alike, however in the United States, their expansionary fiscal policy should continue to offset this obstacle. This is less the case in the Eurozone even though the European recovery plan is supporting investment in construction in the southern European countries. Within the zone, activity continues to deteriorate substantially in Germany where industrial companies are losing export market share. The weakening of inflation should provide some relief for the purchasing power of European households, however, thus providing a gentle boost for consumption: world demand for French products should therefore pick up slightly in H1 2024.

In France, the inflationary episode is now fading: inflation within the meaning of the consumer price index dropped to +2.9% year-on-year in February 2024 (according to the provisional estimate) against +6.3% a year earlier and is expected to continue to decline, reaching +2.6% in June. The composition of inflation has changed considerably, however: prices of food and manufactured products are tending to stabilise and inflation is now driven mainly by the prices of services. In this sector companies are passing on previous increases in their wage costs to their customers. Wage increases remain moderate, however, and are not fuelling a price-wage loop: after two years of decline (in 2022 and 2023), real wages are likely to rise only modestly at the start of 2024.

In addition to increases in real wages, households also look set to enjoy an increase in benefits, primarily pensions, and dynamism in property income, which reflects the increases in payments made to savers. Ultimately, the mid-year growth overhang for purchasing power per consumption unit for 2024 is expected to reach +0.8% compared to +0.3% in 2023 and -0.3% in 2022.

Gains in purchasing power are expected to encourage a relative rebound in household consumption. This is likely to be the case for food purchases in particular, which after two years of unprecedented decline look set to begin a timid recovery, and also for spending on accommodation-catering, which should start moving forward after stalling at the end of last year. However, although household confidence is improving since its mid-2022 low point, it is still well below its long-term average. The increase in consumption is not expected to exceed that of purchasing power and the savings ratio is likely to stabilise at a high level, between two and three points above that observed at the end of 2019.

Monetary tightening continues to hamper investment. In building construction, real estate developers remain very pessimistic and the construction of new housing is likely to continue its decline, despite a slight easing in the spring. Maintenance and improvements, on the other hand, should continue to increase. Purchasing by companies, which resisted fairly well in 2023, looks set to be sluggish in H1. According to the business tendency surveys, companies remain cautious about their purchasing intentions, and highlight the very unfavourable impact that financing conditions are having. Investment in capital goods is expected to decline with only the regular increase in spending on services, especially IT services, enabling corporate investment to stabilise.

In February 2024, the business climate is slightly below its long-term average. In addition, the business tendency surveys reveal an unprecedented divergence in short-term situations between sectors: favourable in aeronautics, which is gaining altitude once again and is subject mainly to supply constraints; depressed in the energy-intensive branches, which were most affected by the rise in energy prices. The first data available for January 2024 (mainly industrial production and household consumption) are rather unpromising, with zero growth expected in Q1, penalised by occasional industrial stoppages, especially in refining and the automobile sector. Thus it is unlikely that the improvement in consumption will be reflected in growth before the spring (+0.3% forecast in Q2 2024). Regarding foreign trade, sales abroad are expected to pick up from the spring, boosted by the resumption of aeronautical deliveries. All in all, the mid-year growth overhang is expected to be modest (+0.5%).

After being significantly higher than the business climate for almost two years, the employment climate has returned to normal since the end of 2023, indicating a return to a trend more in line with activity after a long period of increasing employment growth. By mid-2024, with modest growth over the half-year, employment is still expected to increase, but only a little (+40,000). Given the increase in the active population, particularly as a result of pension reform, the unemployment rate, which has been rising since the beginning of 2023, looks set to continue to rise a little, reaching 7.6% by mid-2024 against 7.2% a year earlier.

This forecast remains surrounded by uncertainty, both upwards and downwards. First of all, continuing geopolitical tensions could have repercussions on world trade or on oil prices. The behaviour of resident agents represents a considerable risk: on the corporate side, businesses have maintained a certain level of investment until now, but the deterioration in their financing conditions could lead to a sharper decline; on the household side, the savings ratio remains high and renewed confidence could provide a boost for activity.