Domestic Demand in France
France - Domestic Demand
Growth steady through year-end despite ‘gilets jaunes’ protests
France’s economy grew 0.3% quarter-on-quarter and on a seasonally-adjusted basis in the fourth quarter of last year, according to a first estimate released by the Statistical Institute (INSEE). Despite the onset of the ‘gilets jaunes’ protests, which brought much of the country to a standstill for several weeks in November and December, growth through year-end was stable from a quarter earlier (Q3: +0.3% quarter-on-quarter s.a.) and landed in-line with analysts’ expectations. On an annual basis, growth slowed to 0.9% from 1.3% in the third quarter. Full-year growth, meanwhile, came in at 1.5%, down sharply from 2.3% in 2017.
Domestic demand slowed considerably amid the ‘gilets jaunes’ political crisis. Household spending stagnated (Q4: +0.0% qoq s.a.; Q3: +0.4% qoq s.a.) in line with the plunge in consumer confidence, and as demonstrations hurt foot traffic during crucial holiday-shopping weeks. Fixed investment also felt the pinch (Q4: +0.2% qoq s.a.; Q3: +1.0% qoq s.a.) as household investment contracted for another quarter on weaker construction metrics, although corporate investment was still up modestly despite waning business confidence. For its part, government spending accelerated in the quarter (Q4: +0.3% qoq s.a.; Q3: +0.2% qoq s.a.).
External demand, meanwhile, was unexpectedly upbeat. Export growth surged (Q4: +2.4% qoq s.a.; Q3: +0.2% qoq s.a.) on the euro’s weakness against the dollar, and exports to the U.S. helped offset more sluggish trade with the remainder of the Eurozone. Import growth, on the other hand, rebounded (Q4: +1.6% qoq s.a.: Q3: -0.7% qoq s.a.) but remained subdued on tepid consumption and investment domestically. Taken together, the current-account deficit shrank and the external sector’s contribution to growth eased to 0.2 percentage points (Q3: 0.3 percentage points).
Commenting on the year ahead, Julien Manceaux, a senior economist at ING, noted:
“Domestic demand will still take time to recover from the abnormal levels of anxiety shown in consumer surveys at the beginning of the year. Given the weaker European economic backdrop that is expected in 2019 and 2020, we believe GDP growth will return to potential, or 1.3% [year-on-year], in both years. If domestic demand recovers slightly, it is likely that external trade will weigh on growth (as it usually does) as the euro catches up some ground against the U.S. dollar over the next two years and less dynamic world trade affects demand for French exports. Note that on this front, all forecasts are made under a ‘no hard Brexit’ assumption.”
Met the why particular analysts expect recent momentum to carry through much of this year on a recovery in domestic demand. Concerns persist, however, over global-trade squabbles and a slowdown across the Eurozone. Analysts expect growth of 1.4% in 2019, which is down 0.2 percentage points from last month's forecast. For 2020, they again see growth at 1.4%.
France - Domestic Demand Data
|Domestic Demand (annual variation in %)||0.5||0.8||1.2||2.0||2.0|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||0.11||0.46 %||Mar 11|
|Exchange Rate||1.12||0.65 %||Mar 11|
|Stock Market||5,266||-0.29 %||Mar 11|
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February 26, 2019
Consumer confidence continued its recovery in February, according to the consumer confidence survey published by the National Institute of Statistics and Economic Studies (INSEE), which climbed 3 points from January to land at 95 points.
February 25, 2019
In February, the National Institute of Statistics and Economic Studies’ (INSEE) business-climate indicator for the manufacturing sector was stable from a month earlier at 113 points.
February 21, 2019
On 21 February, the Statistical Institute (INSEE) reported that consumer prices fell 0.4% from a month earlier in January (December: +0.0% month-on-month).
February 8, 2019
In seasonally-adjusted terms, industrial output expanded 0.8% in December, contrasting a revised 1.5% month-on-month contraction in November (previously reported: -1.3% month-on-month s.a.).
February 5, 2019
In January, the seasonally-adjusted IHS Markit Composite Purchasing Managers’ Index (PMI) fell to 48.2 from 48.7 a month earlier, landing below the 50.0-point threshold and signaling a contraction in private-sector activity. January’s reading reflected weaker services-sector activity, although it was unclear whether these disruptions were brought on by the ‘gilets jaunes’ protests.