France: Q1 GDP disappoints – ING

Julien Manceaux, senior economist at ING, notes that the French GDP growth rebounded by only 0.3% in the first quarter of 2019 as the expected rebound in private consumption was absent and that weakened domestic demand.

Key Quotes

“Household consumption has recovered from the stagnation recorded in the last quarter of 2018 because of the "yellow vests" crisis, but only by 0.4%. Over the year, consumption growth is only 0.6%.”

“In addition, household investment in new construction experienced a new quarter of contraction (-0.3% in the quarter after -0.1% in Q3 and -0.2% in Q4) despite low-interest rates.”

“On the other hand, business investment continued to perform well in the first quarter, although its pace has declined since the first half of 2018.”

“Business investment was still up in Q1, by 0.5% after 0.4% in Q4. This brings their growth to 4.0% on the year, which is very positive given the weakness of domestic demand.”

“In the fourth quarter, weak domestic demand growth (+ 0.2%) was offset by a strong contribution from net exports but the rebound in demand in the first quarter also caused an increase in imports so that the external balance was less positive for growth in 1Q19 (0.0%). It should be noted, however, that exports barely increased in 1Q19 (0.1%).”

“Given the expected slowdown of the economic environment in Europe in 2019 and 2020, GDP growth should remain in these two years at a level close to its potential, 1.3%.”