France's INSEE confirms it expects flat GDP in Q4

FILE PHOTO: Woman shops at fruit and vegetables shop in Paris

PARIS (Reuters) - The French economy should flatline in the fourth quarter, national statistics agency INSEE said on Thursday, confirming an earlier forecast, but the war in Ukraine makes the outlook highly uncertain, it added.

INSEE confirmed it expects 0.2% GDP growth for the third quarter and stagnation for the October-December period.

"While the scenario of modest growth in the third quarter becomes more likely (...) the outlook for the last quarter remains particularly uncertain given the multiple uncertainties about geopolitical developments, energy supply, the health situation and the impact of monetary tightening," the agency said in a note.

For the services sector, INSEE expects a slowdown in the fourth quarter and for the manufacturing sector it anticipates a downturn.

Average full-year growth for 2022 should come in at 2.6%, INSEE said, confirming its September forecast, and compared to a slightly higher forecast of 2.7% on which the French government based its state budget.

Inflation in October should remain close to the September level of 5.6% but is seen increasing again in November and December to reach 6.4% by yearend.

The expected increase is seen mainly due to higher energy costs and to the fact that government-funded rebates for automotive fuel will fall to 10 cents per liter in November from the current 30 cents.

The prices of food and manufactured products should continue to rise due to higher prices of commodities and other cost factors.

Second-half household purchasing power should recover however, INSEE said, due to government support measures voted this summer or announced since then, such as the revalorisation of the index point for public sector salaries and benefits.

Gross household available household income should increase by 4.7% in 2022, INSEE said.

(Reporting by Laetitia Volga; Writing by GV De Clercq; Editing by Benoit Van Overstraeten)