A firmer growth is expected in Q1, clocking in at 0.4% qoq, following a modest H214 (0.2%). Goods consumption likely increased by 1.5% qoq in Q1, mainly due to energy consumption but also impressive new car registrations (10% qoq in Q1). Thanks to low inflation, households benefited from a strong increase in their real disposable income (close to 1.0% qoq in Q1) and likely decreased their savings rate. This momentum is set to ease medium term when inflation starts rising again. Other hard data paint a less buoyant picture. The trade deficit was likely unchanged at 2% of GDP in Q1. Combined with an expected drop of tourism activities after the January terrorist attacks, this would suggest that net external demand contributed negatively in Q1. Construction output fell sharply in Q1 (-2.2% on 3m/3m in February), with further weakness expected, reinforcing the view that French growth will underperform this year (1.2% vs 1.5% in the euro area).Meanwhile, the INSEE business climate index has been improving slightly but remains at weak levels (96 in April).
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