PARIS (Reuters) – The French economy is set to contract slightly this quarter due to refinery strikes and nuclear reactor outages before activity recovers in the first half of next year, the INSEE official stats agency said on Thursday.

The euro zone’s second biggest economy will contract 0.2% in the final three months from the previous quarter, INSEE said in its latest economic outlook.

INSEE trimmed its forecast from a previous projection for flat growth after refinery strikes and maintenance outages at some nuclear reactors reduced industrial output.

France was hit by a series of refinery strikes in October that cut car fuel supplies while maintenance issues in France’s ageing fleet of 56 nuclear reactors reduced their power output to a 30-year low.

The loss of nuclear output would cut French economic growth by 0.4% this year, INSEE said.

Its latest forecast for fourth quarter GDP would leave France with growth of 2.5% for the whole of 2022, slightly lower than the 2.7% expected by the government in its budget planning.

Looking ahead to next year, INSEE forecast France would return to growth in the first quarter with a rate of 0.1% followed by 0.3% in the second quarter.

Although its outlook did not cover all of 2023, INSEE said that by mid-year, the economy would have growth momentum of 0.4%. That implied growth of 0.75% would be needed in both the third and fourth quarters to reach the 1.0% full-year growth target on which the government has based its 2023 budget.

Turning to the outlook for inflation, INSEE said it would keep rising from 6.2% in November to peak in January and February at a 38-year high of 7% before falling back to 5.5% by the middle of the year.

Using EU-harmonised methodology to calculate price changes, inflation hit 7.1% in November.

(Reporting by Leigh Thomas; editing by Barbara Lewis)