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French Growth Hits Another Snag

By Philippe d'ArvisenetMarket OverviewSep 04, 2016 06:16AM ET
French Growth Hits Another Snag
By Philippe d'Arvisenet   |  Sep 04, 2016 06:16AM ET
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  • French growth was nil in Q2 2016. Although a little sharper than expected, this payback is essentially due to temporary factors.
  • Rather good news on the labour market front helps keep in perspective this poor growth performance.
  • A technical rebound in Q3 growth is highly likely but the survey and economic data available so far point to a lacklustre upturn (0.3% q/q according to our estimates), in keeping with the recovery as a whole.

Among this summer’s economic news, the biggest negative surprise was the flat print for Q2 growth1. A payback was expected after the strong Q1 performance (+0.7% q/q), but it proved to be more severe than expected. GDP stagnated, falling short of our growth forecast of 0.2% q/q and the 0.3% q/q estimates by the INSEE and Bank of France. Almost all GDP components contributed to this weak performance.

Although household consumption held up a bit better than expected (it stagnated instead of declining slightly), investment, exports and changes in business inventories were weaker than expected: the declines in investment (-0.2% q/q) and exports (-0.1% q/q) were small but unexpected, while the change in inventory made a more negative contribution than expected (-0.7 percentage points). Two factors kept growth from slipping into negative territory: the still relatively strong rise in public expenditures (0.4% q/q) and the very positive contribution of imports. Indeed, imports dropped off sharply (-2% q/q), in keeping with domestic demand. All in all, the negative contribution of inventories was offset by the very positive contribution of net exports (+0.6 points) and the barely positive contribution of final domestic demand (+0.1 point, see chart 1).

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by Hélène BAUDCHON

French Growth Hits Another Snag

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French Growth Hits Another Snag

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