French companies continue to invest heavily. Over one year, their investments have increased by around 4%. The highest margin rate, resisting French demand and low interest rates are the ingredients of this success.
It has been one of the most important engines of the French economy since 2015 and it is set to remain so for a few more quarters. “Business investment remains dynamic and even resists better than expected “, Notes Julien Pouget, head of the economic department at INSEE. Between 2015 and 2018, French companies increased their investments by 3.7% on average and over the last twelve months, the increase reached 4%. However, GDP growth has slowed down in the meantime.
Highest margin rate
How can we explain this unabated dynamism? First hypothesis, “The cumulative payment of the CICE to companies for 2018 and its transformation into a reduction in charges on 1 January 2019 occasionally supports the margin rate of French companies and their self-financing capacity. This decision may partly explain the good dynamics of the investment, especially since the financing conditions are still very favorable. », Believes Julien Pouget. Indeed, in the second quarter, the corporate margin rate was at its highest since 2008 and the self-financing capacity of French companies exceeded 100%, which means that the latter could theoretically finance their investments without resorting to debt.
And in September, the average rate of equipment loans granted to businesses was only 1.34% against 1.41% a year ago, according to the Banque de France. Economists from the French Observatory of Economic Conjunctures (OFCE) even calculated that despite record debt, the net interest paid by French companies was at a historically low level. Last year, the net interest charge of companies represented 0.8 point of added value against 4.3 points on average ten years ago.
Demand forecasts hold up
Second, the main determinant of investment, business leaders’ anticipation of future demand, is holding up despite the global slowdown. Questioned last month by INSEE, French manufacturers expected certainly less optimistic prospects but which remain roughly in their long-term average.
Finally, it seems that French companies have started their transformation towards the digital economy, investments in software being very dynamic for several years. In a study for the think tank “La Fabrique de l’Industrie” published last year, the economist Sarah Guillou thus remarked that “efforts to invest in software [avaient] experienced strong growth in France from 2009 (+ 30.3% between 2009 and 2015, compared to + 13.1% in Germany) ”. What gives hope that the supply policy will work in the long term and lead to a move upmarket of the hexagonal productive fabric.
This point is however hotly debated by economists, some relativizing this increase. Pierre Sicsic, of the Banque de France, believes that investments in intangible assets tend to depreciate faster, they must be replaced more often. This would partly explain the dynamism of investment in new technologies.