France: Twisted nerve

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

Corporates insolvencies increased by +3.4% y/y in Q4 2018, following a hefty +6.4% in Q3 amid persistent domestic and foreign demand pressures and evidence of renewed strains on selling prices. Major insolvencies were also on the upside, with 20 additional cases in 2018 (compared to 2017) for corporates with turnovers above EUR15bn. Construction exhibited 14 additional cases (+280% compared to 2017). An INSEE survey showed a rise in DSO that may have driven this increased severity, following a decrease in housing starts by -9k in November. Other sectors exhibiting weak business confidence in January are real estate, motor vehicles (supply chain issues driven by new homologation procedures), paper & printing (input price surge) and metals. Accommodation and catering as well as wholesale and retail trade also exhibit weak confidence indices, amid yellow vest consequences on tourism and household consumption. Against this background, the capacity utilization rate was stable at 85.1% in the manufacturing sector in January, showing reasons for a good corporate investment momentum in 2019 (+2.6%) despite the currently low demand environment.