France: economic indicators monthly changes The downturn in economic surveys highlights a drop in demand (contraction of balance of opinion on global and export order books), particularly in the manufacturing sector. The sectors most sensitive to the economic cycle (chemicals, plastics, metals, packaging, wholesale trade and transport services) are all experiencing a marked drop in their synthetic confidence index. In the construction sector, the balance of opinion on the activity in new housing fell again to -22.5 in July (-10.7 in April). By contrast, leisure-related services, information-communication, transport equipment and part of the construction sector (new building excluding housing, maintenance-renovation) are still growing.
Household confidence averaged 82 between June 2022 and May 2023, a level from which it deviated very little until June 2023, when it rebounded to 85. This improvement is linked to the marked reduction in inflation expectations (indicator at -55 in June). However, households consider that the opportunity to save is still high (+33 in June), while the opportunity to make major purchases has deteriorated further (-47 in June, a record low outside the Covid period), boding ill for any upturn in spending.
GDP GrowthDisinflation is now fairly clear (5.5% y/y in June according to the harmonised index, compared to 7.3% in February). This is primarily driven by the drop in energy costs (-3% y/y in June), while food inflation fell from its peak (13.6% y/y in June compared to 15.9% y/y in March), a disinflation that should continue, as seen with the disinflation in manufactured products (selling prices outlook at 7.1 in July compared to 43.9 in December 2022). Services inflation is expected to demonstrate slightly more persistence, but at around the current level of inflation (2.9% y/y in June).
The labour market remains a resilient factor, both in terms of job creation (92,000 net new jobs in Q1, although there are areas of weakness in construction and temporary work) and wage increases (which we expect to reach 5% in 2023, and even 6.7% for broad compensations, including bonuses and variable pay). However, the momentum of the labour market seems to have slowed, with the employment climate deteriorating to 106 in June-July from 110 in April.
We forecast growth of 0.2% q/q in Q2, a figure close to that seen in Q1, due to consumption of household services (mainly leisure), as well as transport equipment. However, economic surveys highlight a downward risk, which is reflected in our nowcast (0.1% q/q).
Stéphane Colliac (article completed on 2O July 2023)
