The French economy landed more than expected in Q1. Quarterly GDP grew +0.2% in 2018Q1 down from +0.7% in Q4. Private consumption was the weakest demand-side driver (+0.1% q/q). Purchasing power issues were pervasive (as it grew +0.2% q/q in Q4 and would probably stagnate in 2018Q1). External demand was revised downwards as well (-0.3% q/q). The recent oil price increase is also nurturing new purchasing power issues in Q2. As a result, private consumption should stay on pause in Q2 (+0.2% q/q). Hence corporates will need more time to decrease inventories, after starting in Q1. This longer duration of the growth slump will also have an impact on the investment momentum. Q2 growth should not particularly accelerate (+0.3%). Overall, we revise our 2018 growth forecast down from +2.1% to +1.8%. From Q3 onwards, growth should recover to +0.5% per quarter, since wage growth suggests more positive purchasing power evolutions. As a result, our 2019 forecast is revised up from +1.9% to +2%, driven by higher consumption and wage growth (both growing +1.8%) in 2019.
