France: Growth rebounded towards a pace of around 2% - Rabobank

This morning’s French consumer spending figures for July basically indicated that growth has rebounded towards a pace of around 2% following the decline in growth earlier this year, notes the analysis team at Rabobank.

Key Quotes

“In y-o-y terms spending growth accelerated from an upwardly revised 0.7% in June to 2.1% in July. The inflation-induced decline seems to have come to an end whilst the pickup in labour market activity (unemployment has consistently dropped over the last three quarters) provides a good base for more steady growth in consumers spending.”

“Meanwhile, the GDP growth details released this morning showed that exports were vigorous in Q2 (+2.5% q-o-q) whilst growth of investment also exceeded that of GDP (0.7% versus 0.5%), implying that the investment-to-GDP ratio has continued to increase. Altogether this must be pleasing news for the fresh president, who is battling to regain his popularity in the face of a record-drop in popularity ratings. Spending EUR 30,000 on new make-up and taking a dog (a nice one, we must acknowledge) are his new weapons. But the real litmus test obviously will be whether Mr. Macron is able to push through his promised labour market reforms. Although most labour unions have maintained their composure, this may change on Thursdaywhen important details of his plans are expected to hit the street.”

“After this morning’s French consumer spending figures for July, S&P CoreLogic’s house price indicators and the Conference Board’s survey of consumer confidence are the main things to watch. House price growth (in the 20 biggest cities has been remarkably steady over the last three years, hovering just around the 5% level. That’s real growth when you have an inflation rate that is still below the Fed’s target level.”