France: The price of uncertainty

3 min
Stéphane Colliac
Stéphane Colliac Senior Economist for France and Africa

In March, the demand tensions that French corporates have been facing widened, with a new deterioration of their order books and a further rise in inventories, two evolutions that may limit future output. It becomes increasingly evident that French corporates are exposed to a combination of risks (Brexit, emission norms in the automotive industry, risk of U.S. tariffs on EU car exports, trade tensions between the U.S. and China) that are affecting them directly or through trade partners (UK, Germany). Despite the fact that some of these risks have not materialized yet, demand is already adjusting. The most affected sectors are carmakers, car suppliers, metals, plastics and the chemicals industry. For carmakers, inventories of finished goods are the highest since February 2009. At the same time, only 13% of French households are considering a potential car purchase within the next 12 months (-2pp from a year ago). It shows their lower appetite for durable goods. As a result, we pencil in a stagnation of car registrations this year (after +3% in 2018).