GDP grew 0.3% in the third quarter, driven by household consumption and business investment. The good resilience of domestic demand explains this good result in the face of the slowdown in the global economy.

Household consumption, supported by growth in purchasing power, climbed 0.3% in the third quarter. If it has not shown a clear acceleration for a year, it does not falter either.

Somehow, French growth is resisting the turmoil of the global economy. According to INSEE, GDP grew by 0.3% in the third quarter, as economists expected and as its long-term trend. No acceleration in activity this summer, since since the start of 2018, the French economy has grown at the same rate on average. But no degradation either in an international context which has darkened all the same in recent months.

Even if it is experiencing a certain lull, the trade war between the United States and China is not over. And the synchronized brake on the German and Chinese economies as well as Brexit have prompted the IMF to revise its forecast for global growth this year down to just 3%. “Finally, the questions today relate more to the international situation than to the evolution of French domestic data”, summarizes Julien Pouget, head of the economic department at INSEE. If this growth rate of + 0.3% were repeated in the fourth quarter, then French growth would stand at 1.3% in 2018, slightly below the government target (+ 1.4%).

Dynamic domestic demand

It is thanks to domestic demand that France is avoiding, for the moment, a more pronounced slowdown in its activity. Household consumption is holding up. Purchasing power is supported by job creation, which is still dynamic, wage increases which are admittedly moderate but real, and “yellow vests” measures. The French Observatory of Economic Conjunctures (OFCE) estimates at 800 euros per household on average, or 2.4%, the gains in purchasing power this year, or nearly 4 times more than in 2018. But all this money has not yet been spent, as evidenced by the rise in the savings rate over the past year. Consumption is not as strong as what the government was hoping a year ago, but households have put aside, which limits the risk of unpleasant surprises for the coming quarters. This is rather reassuring in a risky international context.

Business investment remains dynamic despite the decline in industrial production for two quarters. But interest rates remain very low and corporate margins are expected to peak this year.

The black spot in foreign trade

There remains foreign trade. The slowdown in global growth is making itself felt. While exports have grown on average every year by nearly 3% since 2014, they barely climbed 2% in the third quarter, on an annual basis. Foreign order books have started to deteriorate, according to French manufacturers interviewed by INSEE. As a result, the trade deficit in the third quarter cut GDP growth by 0.4 point.

However, the latest surveys from Germany seem to indicate a stabilization of the economic situation of France’s largest trading partner, even if the morale of German industrialists remains low. French household confidence is high. That of French business leaders is less degraded than among our German and Italian neighbors and is compatible with growth of around 0.3% to 0.4% over the coming quarters. The prospect of GDP growth expected by the government of 1.3% next year therefore seems quite achievable.