France: Dismal consumption in 1Q, 2Q starts on the wrong foot – ING

Julien Manceaux, Senior Economist at ING, notes that France’s GDP growth was weaker than previously thought while private consumption growth was dismal and despite the strong consumer confidence surveys, the second quarter has started on the wrong foot

Key Quotes

“French GDP growth was weaker than previously thought, at only 0.17% QoQ in 1Q18 while private consumption growth was dismal.”

“In May, French consumer confidence remained broadly stable in contrast to business confidence which was more affected by the strikes.”

‘Even though this data is volatile, the moving average remains disconnected from consumer confidence since 2016, showing a rather flat trend.”

“To confirm this, an update of 1Q18 GDP figures show that growth has been weaker than previously thought in the first quarter, with domestic demand growing by a dismal 0.2% QoQ. Private consumption growth was even weaker at 0.1%, which means that it will take a strong rebound in the second quarter to bring private consumption growth above 1.5% in 2018 (after 1.1% only in 2017).”

“We remain optimistic for the second half of the year where a positive mix of fiscal measures and lower unemployment should help a much-awaited private consumption rebound and still bring GDP growth to 2.1%.”

“However, the current looming institutional crisis in the Eurozone could dampen confidence again and reduce 2H18 growth prospects further. The jury is still out.”