After so many years of hardship, a little tranquility can only do good for the morale.
But alas, it is not yet time to bring out the drums and trumpets.
It’s confirmed: French growth was indeed on track during the first quarter of 2015.
Even better, according to the figures published by INSEE on May 13th, the quarterly evolution of the French GDP was stronger than initially anticipated. This bodes well for the future.
In the first quarter of 2015, France reported a quarterly GDP growth of 0.6%, while the government expected 0.4%. Indeed, the French quarterly GDP had not experienced such progress since the second quarter of 2013, and it had been almost two years that it kept fluctuating between -0.2% and +0.2%.
This relatively strong increase in GDP is mainly explained by the solid performance of household consumption expenditures.
More generally, households in fact benefited from an increase in their purchasing power in the first quarter. For example, in the first two months of the year, the annual inflation rate in France was negative (-0.4% in January and -0.3% in February), while in March, it was zero.
The evolution of oil prices is indeed a symptomatic element of this negative inflation. In the first quarter, the average price of a barrel of Brent was $56.6 (compared to $77.7 in the fourth quarter of 2014).
Finally, household purchasing power benefited from the impact of the CICE. To recall, this fiscal measure consists of a reduction in corporate tax to be paid, calculated on the basis of the wage bill between 1 and 2.5 times the minimum wage.
Undeniably, the acceleration of household consumption expenditures is very good news. Let’s remember that private consumption structurally accounts for more than half of the French GDP.
However, the persistent and worrying lethargy of investment remains. Indeed, in the first quarter, non-financial corporate investment increased by only 0.2% (after -0.1% in the previous quarter).
In this context, announcements of a 1.5% annual growth appear unrealistic. However, the government’s official forecast of a 1.0% annual growth remains credible: it’s something at least… especially after the IMF announced this Tuesday its revised estimate of 1.2% growth exceeding that of the Finance Act.
