France: Stop-and-go growth cycles redux


French growth has recorded a stop-and-go cycle during the last 4 years. While the Covid period initiated this phenomenon in response to successive lockdowns and reopenings of the economy, subsequent shocks generated precautionary behaviour: lowering inventories and sudden stop of growth at the time of the shock (energy crisis, impact of rising interest rates), and then inventories rebuilding and growth recovery thereafter. This phenomenon could contribute to growth during the course of 2024, after the stagnation recorded in the second half of 2023.


During the last four years, the French economy has experienced periods of poor growth and recoveries: in short, stop-and-go growth.

The origins of the stop-and-go can be traced back to the period between the end of WWII and the first oil shock, when plans to stimulate growth through public spending were followed by fiscal consolidation after the economy returned to full employment.

It was de jure economic policies. The stop-and-go of modern times is different and is more de facto. During the Covid period, with its lockdowns and uncertainties about the speed and intensity of the subsequent return to growth, corporates had a precautionary behaviour in terms of production.

This precautionary stance is equivalent to not producing too much before the announced shock, and then resuming production after the worst had been avoided.

Thus, with the fear of an energy shortage, French growth came to a sudden stop and GDP stagnated in the fourth quarter of 2022 and in the first quarter of 2023, with a cumulative negative contribution of 0.7 percentage points of inventories to growth.

In the second quarter of 2023, as the shock was less severe than expected, the French economy suddenly had to rebuild its inventories, with a positive contribution of 0.5 percentage points that brought GDP growth to 0.6% q/q.

Before breathing again: GDP stagnated in the third and fourth quarters of 2023, with a cumulative negative contribution of inventories of 1 percentage point.

It was driven by several shocks such as a slowdown in Germany and monetary policy tightening.

What’s next for 2024? Demand has decreased, but expectations of a rebound may come as inflation has decreased as well. Better PMI readings were even recorded in February: perhaps the sign that companies are preparing to rebuild their inventories in order to be ready for the next recovery.