France: Q1 growth fails to match the strength of surveys – HSBC

Chantana Sam, Analyst at HSBC, explains that French GDP growth decelerated to 0.3% q-o-q in the first quarter of 2017, slightly below consensus expectations of 0.4% q-o-q.

Key Quotes

“On a more positive note, GDP growth for the previous quarter was revised higher, from 0.4% to 0.5%. However, looking at the details of release, the overall message remains rather downbeat. Exports especially disappointed with a 0.7% q-o-q fall over the quarter, despite the signs of a synchronised global upturn at the start of the year. It suggests that the lack of external competitiveness remains a major drag for the French economy.”

“On the domestic front, household consumption was also weak (growing by just 0.1% q-o-q) in spite of the resilience signaled by latest consumer confidence surveys. In contrast, investment was the major bright spot of the release: it accelerated again, on the back of stronger business investment. That said, the sustainability of this positive trend on investment for the second quarter is not a given, considering the fact that political uncertainty should remain elevated until the next June parliamentary elections. On that backdrop, we expect GDP growth to fall again in Q2.”