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France: France: Fluctuat nec mergitur

2016/01/03

Following the terrorist attacks on 13 November, confidence surveys in December understandably showed a sharp fall in the retail and services sectors (-4pts and -2pts, respectively) but they remain strong and point towards further increase in the coming months.

The in general index still stands at 101, marginally above the long-term average, as business confidence improved by +1pt in both manufacturing and construction. Meanwhile, consumption fell -1.1% m/m in November, reflecting declines of -4.7% in consumption of textile clothing and -5.6% in spending on energy, although both these result from the mild temperatures recorded in November.

Indeed, a better indicator of consumer willingness to purchase is spending on durable goods, which increased by +0.5% m/m and +3.1% y/y. As a result, we believe the current modest downturn is temporary. Even so, Q4 will be less strong than initially expected and we have revised our 2015 and 2016 GDP increase forecasts by -0.1pps, to +1.1% and +1.4%, respectively.

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