Re-elected French President Emmanuel Macron has a lot to think about. Before he could once again win the race for the presidency, analysts publicly announced the depressing results of the French economy in the first three months of this year.
According to the official statistics agency INSEE, there were no changes in the period from January to March in the second largest economy in the eurozone, that is, in the first quarter it seemed to be paused, and compared to the end of 2021, it completely experienced a significant decline. Recall that France's GDP rose by 0.8% in the last three months of last year, although economists had previously predicted less growth for it.
Data released today showed that prices in France rose by 0.5% in April and reached a record inflation rate of 5.4%. This is the highest figure since France started using the European Union methodology for calculating indicators, namely since the early 1990s.
The similar economic situation in France shows that Europe has really suffered because of the military conflict in Ukraine and the strong volatility of energy prices, which have risen in price by 26.6% year on year. And although the French economy is less subject to the pressure of the Ukrainian conflict than the economies of most eurozone countries, such as Germany, it has not been able to avoid actively growing inflation. But it affects the mood of consumers. And here's the bottom line: French household spending fell 1.3% in the first quarter. Households are traditionally the driving force behind economic growth, but it is obvious that consumer confidence in the light of constantly rising prices for electricity and fuel is noticeably falling.
A spike in inflation is certainly not the best ground for Macron ahead of legislative elections due next month. These elections will determine whether he will have enough votes to take full control of the country for the next five years. Prior to this, the Macron government managed to contain inflation with varying degrees of success - at a level below the average for the eurozone.
The current French government has put in place a €25bn (or $26.3bn) package to stave off rapidly declining purchasing power. However, this assistance does not seem to have played a significant role in changing the degree of French consumer confidence. The main theme of last weekend's French presidential election was the rising cost of living for ordinary consumers. According to experts, in the short and medium term, due to rising inflation, consumer distrust will increase, creating an obstacle to the development of the economy.
In general, we can say that the immediate prospects for Europe are extremely uncertain. Another round of sanctions, including a possible ban on Russian oil imports, risks knocking out EU industry in one blow. And exorbitant inflation and a severe drop in consumer confidence will jeopardize consumer demand.
