France: Business confidence remains flat, for the second year in a row – ING

FXStreet (Delhi) – Julien Manceaux, Economist at ING, notes that figures published by the Banque de France showed that business confidence has remained low and stagnant during the last two years, consistent with the weak GDP growth that is still observed. 2015 should also record the lowest inflation rate in more than 25 years.

Key Quotes

“In France, figures published yesterday by the Banque de France showed that business sentiment failed to improve significantly in December, ending 2015 just below its long-term average, at 99 after 98 in November). Confidence will therefore have remained remarkably stable in 2015, oscillating between 96 and 99. This is comparable to what happened in 2014 as the last rebound in business confidence was in fact registered in the last quarter of 2013. Since then, its levels have been consistent with weak GDP growth of around 1% a year.

In 2016, we think that business confidence should stabilise at higher levels, consistent with a still muted acceleration of growth towards 1.5%. The first signs of this small acceleration can already be found in the recent better manufacturing production figures and corporate investments. However, we doubt that it will be enough to support strong employment growth this year. President Hollande looks equally unconvinced as he announced a come-back to economic policies closer to his traditional left than of supply-side inspiration to fight unemployment this year. These policies should be detailed next week.

One of the main supports of French private consumption (and hence of GDP growth) in 2015 has undoubtedly been low energy prices. Today, inflation figures will be published by INSEE and are likely to show a slight rebound in December, which will leave inflation at 0.0% for the last month and for 2015 as a whole. This is the weakest inflation registered in France in more than 25 years and one that boosted real wages as nominal hourly wages continued to grow in 2015 (albeit at a slower pace). In 2016, this should continue to support private consumption in the first half of the year, before a higher employment growth hopefully brings its support.”

Julien Manceaux, Economist at ING, notes that figures published by the Banque de France showed that business confidence has remained low and stagnant during the last two years, consistent with the weak GDP growth that is still observed. 2015 should also record the lowest inflation rate in more than 25 years.

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