France: Growth steady through Q1
France’s economy grew 0.3% quarter-on-quarter and in seasonally-adjusted terms in the first quarter, according to a first estimate released by the Statistical Institute (INSEE). Despite lingering concerns over the ‘gilets jaunes’ protests, growth at the outset of the year was stable from a quarter earlier (Q4 2018: +0.3% quarter-on-quarter s.a.) and landed in-line with analysts’ expectations. On an annual basis, too, growth was steady from the previous quarter (Q1: +1.1% year-on-year; Q4 2018: +1.0% yoy).
Domestic demand picked up. As expected, household spending bounced back in the aftermath of the ‘gilets jaunes’ political crisis (Q1: +0.4% qoq s.a.; Q4 2018: +0.0% qoq s.a.). Household investment, however, continued to fall despite low interest rates, which offset rising business investment; overall, fixed investment slowed a bit (Q1: +0.3% qoq s.a.; Q4 2018: +0.4% qoq s.a.). Meanwhile, for its part, government spending cooled off in the quarter (Q1: +0.1% qoq s.a.; Q4 2018: +0.4% qoq s.a.).
External demand, meanwhile, offset these gains. Export growth slowed to a crawl (Q1: +0.1% qoq s.a.; Q4 2018: +2.2% qoq s.a.) on sluggish demand from the major players of the Eurozone. A strong dollar, on the other hand, appeared to keep exports to the remainder of the world relatively upbeat. Import growth, meanwhile, remained snappy (Q1: +0.9% qoq s.a.; Q4 2018: +1.2% 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%.”