France: Ignition, supply side

5 min

GDP growth ended 2017 with a new steady figure of +0.6% q/q in Q4, the fifth quarter with about +0.5% growth. This growth was supply-side driven. Corporates increased their inventories which added +0.4pp to full-year 2017 growth, a usual pattern of growth acceleration when firms bank on future demand increases. Moreover, corporates continued to increase their capacity utilization rate which reached 85.8% in Q1 2018, a level rarely seen in the past. This triggered strong corporate fixed investment growth of +4.3% in 2017. And low vacancy rates in housing boosted household investment growth to +5.1% in 2017. 

Yet, overall domestic demand did not accelerate in 2017 (+1.9%, after +2% in 2016) as private consumption grew by just +1.3% (after +2.1% in 2016). We forecast full-year growth to accelerate from +1.9% in 2017 to +2.1% in 2018, driven by domestic demand (+2.3%) which should be fueled by consumption (+2%) and a new strong increase of corporate investment (+5%). External demand will also be supportive, since export expansion is expected to accelerate to +4.7% (from +3.5% in 2017) as a result of higher demand from the Eurozone.