France: Domestic demand bounces back, propels growth in Q1
France’s economy grew a seasonally-adjusted 0.3% quarter-on-quarter in the first quarter, according to a comprehensive estimate released by the Statistical Institute (INSEE) on 29 May. Although first-quarter growth was unaltered from the preliminary estimate, revisions to last year’s fourth quarter—which was revised up to 0.4% from 0.3%—suggest that growth tapered somewhat at the outset of the year.
Household spending recovered somewhat in the aftermath of the ‘gilets jaunes’ political crisis (Q1: +0.4% qoq s.a.; Q4 2018: +0.3% qoq s.a.). Household investment, meanwhile, stagnated despite low interest rates, which offset rising business investment; overall, fixed investment slowed a bit (Q1: +0.5% qoq s.a.; Q4 2018: +0.6% qoq s.a.). For its part, government spending cooled off in the quarter (Q1: +0.2% qoq s.a.; Q4 2018: +0.4% qoq s.a.).
Export growth slowed markedly (Q1: +0.4% qoq s.a.; Q4 2018: +2.0% qoq s.a.) on sluggish demand from the major players of the Eurozone. Import growth, meanwhile, picked up (Q1: +1.4% qoq s.a.; Q4 2018: +1.1% qoq s.a.) amid the recovery of domestic demand. Taken together, the external sector subtracted 0.3 percentage points from growth in the first quarter (Q4 2018: added 0.3 percentage points).
Commenting on the year ahead, Julien Manceaux, a senior economist at ING, noted:
“Looking at the first-quarter figures, it seems that domestic demand will still need some time to recover from the abnormal levels of anxiety recorded earlier in the year in consumer surveys. They still show a strong preference for savings and higher fears of unemployment than last year despite the resumption of job creation. 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%.”