Macroeconomic environment, Manufacturing production and confidence indicators, International prices Commodity prices and EUR/USD exchange rate
Macroeconomic environment
Xerfi's scenario for 2024
GDP virtually stagnated during the 2nd half of last year
The French economy has had a rude landing. GDP growth ended up slipping to practically zero in the second half of the year, after the pleasant surprise of the 2nd quarter (+0.6%). Strictly speaking, this was not a trend reversal. The Q2 figure was well above forecasts due to the exceptional performance of foreign trade. The momentum quickly faded thereafter and this is a bad sign for the performance we can expect in 2024. This will certainly be the year of falling inflation, but even more so the year of the effects of rising interest rates and of the downturn in the labour market. The unemployment rate has already started to rise and, according to our scenario, could approach 9% by the end of the year. Household fears will therefore gradually change in nature. Until now, they were concerned about the consequences of rising prices on their financial situation. Now, concerns about the future trend in unemployment are coming back. Meanwhile, business investment, which had been resilient until recently, has also finally faltered. Businesses have been caught out by the simultaneous deterioration in their activity and the financial environment.
Industrial activity and business climate
Manufacturing production and confidence indicators
Manufacturing activity has been supported by the upswing in the transport equipment industry
Manufacturing output grew very moderately in 2023 (+0.6% in volume terms over the year). The main growth driver was the recovery in the production of transport equipment, both automotive (+11%) and aeronautical (+14%). On the other hand, activity in many sectors fell into negative territory, penalised by the fall in household consumption and/or by a loss of competitiveness due to high energy costs in Europe. This is particularly the case in the food industry, plastics, chemicals, non-metallic construction materials and the paper industry.
Growth in the manufacturing industry is set to remain weak in 2024 (+0.5%). The production of capital goods will decline slightly, penalised in particular by a drop in export demand. Production of building materials will suffer from the downturn in construction activity, while the agri-food industry will once again be on a downward trend, penalised in particular by foreign competition. The main driving forces will be found in aeronautics and in some of the energy-intensive sectors that had slowed down at the start of 2023, such as chemicals
Business confidence and the climate of employment improved in March
The general business climate improved slightly in March. It returned to its 'normal' level (100), corresponding to its long-term average, after 5 consecutive months below this level. The improvement in the general climate can be explained by a rise in the indices for industry (+1 point relative to February), services (+2 points) and retail trade (+2 points), while business sentiment in the construction sector deteriorated by 1 point relative to the previous month.
The employment climate stabilised above its long-term average (at 102, as in February), after falling below 100 in January 2024 for the first time since April 2021.
International prices
Commodity prices and EUR/USD exchange rate
Towards a stabilisation in oil price at slightly above 80$/barrel on average over the year 2024
After rebounding strongly between July and September, the price of Brent crude fell sharply between October and December 2023, before bouncing back since the beginnings of 2024 and reaching 84$/barrel in February. This summer's rebound was due to the large deficit that emerged on the world market in the 2nd half of 2023. On the supply side, this deficit was explained by the production cuts implemented by the OPEC+ countries (led by Saudi Arabia and Russia) and, on the demand side, by the recovery in demand for fuels in China, where health constraints had paralysed travel and tourism in 2022. However, the downward trend has been reasserted over the last 4 months of 2023, against a backdrop of worsening global growth prospects, rising non-OPEC+ production (notably from the United States) and the increasingly uncertain maintenance of OPEC+ production quotas. Several countries in the alliance, such as Nigeria, Congo and Angola, have asked to be allowed to produce more crude in 2024, and Angola ended up leaving the organisation in December. In the current context of high geopolitical tensions in the Red Sea, the price of Brent is highly volatile. With global growth still weak and the oil market set to return to surplus in 2024, our forecasts are for a stabilisation of Brent price at around $82/barrel this year.
Industrial metal prices followed a downward trend between the last spring and autumn, against a backdrop of sluggish economic conditions and the normalisation of mining supply conditions, but upward pressure reappeared this winter, particularly on copper, iron ore and steel prices, in response to economic news (monetary policy decisions, global growth forecasts, the property crisis in China) and political news (growing tensions in the Middle East since November). In our scenario, prices should fall more moderately in 2024 than in 2023, or rise very slightly in the case of aluminium.
