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Hélène Baudchon, Research Analyst at BNP Paribas, points out that major supply-side constraints and hiring difficulties emerged in late 2017 for French economy and though normal during phases of accelerating growth, they nonetheless caught their attention because other indicators are not showing the same degree of pressure.

Key Quotes

“The output gap is a key cyclical indicator. As estimated yesterday, it had not completely closed in 2017, and the low level of core inflation suggests it might have been even more negative. These trends raise the question of France’s position within the economic cycle.”

“Based on our analysis, the French economy has moved out of the recovery phase and growth has peaked, although it is not showing the signs of overheating that typically mark the end-of-cycle period.”

“The economy seems to be in the intermediary growth phase, during which the economy slows but continues to grow at a faster pace than the potential growth rate.”