France’s GDP likely contracted 0.1% q/q in Q4 2015

France's Q4 2015 GDP is expected to have entered the contraction territory at -0.1% q/q after growing modestly by 0.25% q/q in Q3 2015. The nation's 2015 annual GDP growth is likely to slow from 1.2% to 1%.

"Although we expect a strong improvement in Q1 16 to 0.7% qoq and a firm profile over the remaining quarters of the year, carry-over effects imply that our 2016 annual GDP growth forecast has to be revised down by one tick to 1.3%", says Societe Generale.

A temporary broadening of trade deficit, the mild winter and the Paris attacks have led to revising the GDP growth downwards. Consumption in France is expected to have declined by 0.2% q/q in Q4 2015. Goods consumption accounts for 50% of the total consumption. Even if there is a strong recovery in December, goods consumption is expected to have dropped by 0.5% q/q in Q4. This is mainly due to a drop in energy consumption of 1.4% q/q.

Still, non-energy goods consumption is expected to have dropped by 0.4% q/q. Services consumption is likely to have declined by 0.2% as the accommodation and restaurant sector was impacted after the Paris attacks. However, large department stores in Paris have reported that sales are slowly coming back to normal level as temperatures are getting colder. Overall, consumers are likely to spend a considerable amount of their savings from Q4 in H1 2016.

Meanwhile, the trade deficit is expected to have widened to 2.3pp of GDP in Q4 from 1.9pp of GDP in Q3. Net external demand is likely to have subtracted 0.2pp from GDP due to expected decline in tourism activities following the November terrorist attacks. The negative contribution from net external demand is expected to be partly reversed in Q1 2016. Meanwhile, inventory rebuilding and equipment investment is expected to have made positive contribution to GDP growth in Q4.