French economic growth likely slowed in Q2; but growth to prove resilient

French hard data, such as industrial production and consumption, are indicating towards the GDP growth of 0.3 percent quarter-on-quarter in the second quarter of 2016, noted Societe Generale in a research report. This would be a deceleration from the previous quarter’s 0.6 percent quarter-on-quarter growth. Exceptional energy consumption had stimulated the first quarter growth. However, the expected slowdown in the second quarter growth would still constitute resilient growth, said Societe Generale.

The second quarter growth is likely to have been driven by consumption again, and the indications are that trade is also expected to have contributed for the first time in four quarters. Meanwhile, inventories are likely to have been a drag on the headline growth. Uncertainty from the Brexit vote is expected to slow business investment in the future.

However, tailwinds are likely to continue to underpin the French economy. Construction seems to have stopped weighing in on the growth, whereas tax cuts and low debt servicing costs stimulate corporate savings that should raise capex and hiring. Meanwhile, consumption is expected to have been strong in the second quarter.

“We expect a 0.6 percent acceleration in June with a steady pick-up in both energy and goods consumption. If our forecast is correct then goods consumption will have increased by a resilient 0.45 percent qoq in 2Q16,” added Societe Generale.