France: 2018 growth better than expected, lacklustre 2019 anticipated…
According to INSEE figures released on Thursday, May 16th, the 2018 GDP growth jumped 1.7% in data adjusted for working days, whereas it had been estimated at 1.6% previously. This is the second upward revision of French activity by the national statistical institute, which in January had pitched its published growth estimate at 1.5%.
In details and compared to previous estimates, foreign trade has been more favourable with a contribution of 0.7 point to activity, against 0.6 point in the previous figures. Above all, these results are much more positive than in 2017 (0.1 point) and 2016 (-0.4 point). Household consumption has been slightly revised upwards; it grew by 0.9% instead of 0.8%, due to a significant increase in purchasing power (+ 1.4%). Meanwhile investment remained solid, but still weaker than expected: it rose 2.8% last year, instead of 2.9%.
The new growth figure, which does not change the level of the public deficit for 2018 (2.5%), remains lower than the European Union average (1.9%) as well as the average of the Eurozone (1.8%).
However, this upturn on the growth front is far from easing the anger on French roundabouts. The "yellow vests" movement continues, and last weekend had been holding out for 6 months.
The sluggishness is expected to continue this year. Growth should fall to 1.4% according to the Banque de France. And even maybe to 1.3% according to the OECD, particularly because of the slowdown in global activity. It is hoped that the stimulus measures introduced by the French government in response to the "yellow vests" claims can help to cushion the downturn by boosting private consumption and encouraging households to depart from their high saving rate.
Julien Moussavi, Head of Economic Research
Source: Beyond Ratings, INSEE