France’s non-financial corporate investment growth likely to quicken to 3% y/y in 2016

In Q3 2015, France's non-financial corporate investment rose for the sixth consecutive quarter by 0.5% q/q and 1.9% y/y. The growth is likely to accelerate to 3% y/y in 2016. According to the October INSEE quarterly survey of manufacturing investment, business leaders expect investment to modestly improve by 3% in 2016.

Meanwhile, profit margins in 2015 have rebounded materially with the help of lower oil burden and corporate tax. The lower corporate tax burden has been 60% accountable in helping profits rebound. The net reduction in the corporate tax burden is estimated to have amounted to €9bn between 2013 and 2015. Ratios of profit margins will carry on improving in 2016.

"However, economic models point to at least a one-year lag between the improvement in profit margins and capex decisions, which is why we remain cautious about capex growth in 2016. Moreover, recent concerns over China and global trade will likely dampen investment", says Societe Generale.