The French economy grew strongly in Q1 2015 with GDP up 0.6% q/q.
Final domestic demand was the main driver of GDP growth (0.6 point contribution). The change in inventory contributed 0.5 points to growth, but was offset by the negative contribution of net exports (also 0.5 points).
Although a recovery movement is well underway, it must still be consolidated through a rebound in investment and employment.
Household purchasing power gains and the upturn in corporate margins are encouraging.
The recovery should also benefit from a catching-up effect after several years of quasi-stagnation.
French growth was surprisingly robust in Q1 2015, with real GDP up 0.6% q/q1. Growth was not only higher than expected, but it was also the second strongest performance in the Eurozone after Spain, up 0.9% q/q. France outperformed Germany (+0.3%), which staged a disappointingly weak performance, as well as the Eurozone as a whole (+0.4%). Yet this surprise effect quickly gave way to scepticism and doubts about the solidity of the improvement. French growth strength would be misleading because 0.5 points of it was due solely to the contribution of inventory changes, which is not a sustainable component of growth. Yet this calculus masks the surge in imports and the negative contribution of net exports that comes with it, which trimmed 0.5 points from growth. These two components cancel each other out, which means that Q1 growth was in fact fuelled entirely by final domestic demand (0.6 point contribution). This lends the recovery a certain solidity.
Where do things really stand? Is French growth as strong as it appears? A closer look at Q1 statistics shows that a recovery is underway in France, although it must still be consolidated through a rebound in corporate investment and private sector employment. What really matters is the recovery’s momentum and self-feeding capacity, which is to say its sustainability and its capacity to reduce unemployment. Although the road that lies ahead still has not been totally cleared of obstacles, lots of conditions have come together (more so than in the three previous years) to fuel a virtuous circle.
A good start
A closer analysis of the Q1 figures shows that some factors of fragility and weakness must be kept in perspective. Indeed, Q1 growth can be considered rather solid and consistent with a recovery taking shape. First of all, if we go over the contributions to growth cited in the introduction and compare them to Germany, we can see that French growth is not illusory. In both countries, Q1 growth relies heavily on final domestic demand, which contributed 0.6 points in France and 0.8 points in Germany. The apparent sluggishness of German GDP growth, which was limited to 0.3% q/q, is due to the negative contributions of both the change in inventory and net exports (0.3 and 0.2 points, respectively).
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BY Hélène BAUDCHON