Exports save the day for French GDP growth
Prospects for French economic growth are looking up, but disruptions to consumption are possible.
French GDP rose by 0.3% quarter-on-quarter (q-o-q) in Q4, the same pace as in Q3. The details reveal that Q4 exports surged significantly, while household consumption and investment slowed. This left growth for the year at +1.5%, following +2.3% in 2017.
The breakdown of GDP data shows that household consumption growth decelerated significantly, to 0.0% from +0.4%, with the disruption to Christmas sales around the “yellow vest” protests probably partly to blame. Public consumption growth accelerated a bit, increasing +0.2% q-o-q in Q4, after +1.0% in Q3, primarily due to a significant drop in business investment growth, which fell to +0.3% from +1.7%. Imports bounced back in Q4, growing by 1.6% (from -1.7% the previous quarter) and exports jumped 2.4% q-o-q. This surge was due to dynamic aeronautic and naval equipment deliveries.
Looking ahead, the exports surge we saw in Q4 is likely to be smoothed over several quarters, supporting the economy throughout 2019. We therefore remain cautiously optimistic on the French outlook for 2019. While the significant increase in household purchasing power is likely to support the economy throughout this year, more disruptions cannot be ruled out. Moreover, the external backdrop remains challenging. We expect the French economy to grow by 1.4% in 2019, with risks tilted to the downside.