The French economy is deteriorating, as evidenced by the business climate and household confidence. The INSEE composite business climate index is down by one point a month, from 98 to 96 between September and November (long-term average at 100). This deterioration can be seen across all sectors, including services, underlining the fact that the cooling has spread throughout the economy.
Trade is the weakest link, with INSEE indices at 90 for retail trade excluding motor vehicles (down 3 points in November) and 93 for wholesale trade (down 2 points), underlining the low level of demand. Industrial order books show that, within demand, it is investment that is struggling the most, with, in particular, a balance of opinion on order books of -63 in machinery and equipment in November.
Household confidence has deteriorated significantly (from 95 in September to 90 in November), due to a sharp rise in the balance of opinion on the outlook for unemployment (from 28 to 42 in two months). The flash estimate of job creation in the private sector showed job losses for the second quarter in a row (-25,000 in Q3). In addition, while disinflation is clear (harmonised index at +1.6% y/y in October, compared with 4.6% a year earlier), it remains incomplete in terms of services prices (half of the index), which are still rising sharply (2.9% y/y).
We expect growth of 0.1% q/q in Q4 (we have to subtract 0.3 points from our nowcast of 0.4%, as it does not take into account the impact of the Olympic Games, which added 0.3 points to Q3 growth and subtracted them from Q4 growth). Two factors lead us to believe that growth should remain positive despite this negative impact: the rebound in aeronautical exports (after severe production constraints until October) and a small surge in consumption (offers from car manufacturers to top up the bonus for purchases made before the bonus expected tightening). Overall, growth should stand at 1.2% in 2024 (1.1% in 2023), but with a 0.3-point carryover for 2025 (compared with the 0.5-point carryover at the start of 2024).
Article completed on 27 November 2024
