INSEE raises its forecast of growth in France for 2017

Ⓒ AFP/Archives – CHARLY TRIBALLEAU – | Containers in the port of Le Havre, July 4, 2014

After the government, INSEE has in turn raised its growth forecast for 2017, seeing it accelerate to 1.8%, a level “unpublished since 2011”, reflecting the optimism that has been gaining business leaders for a few years month.

The National Institute of Statistics now expects a 0.5% increase in gross domestic product (GDP) in the third and fourth quarters.

Figures that will allow growth to accelerate over the year to 1.8%, “after three years of modest growth around 1%.” In its previous forecast, published in June, INSEE anticipated 1.6% growth in 2017.

Such a performance would be “never seen since 2011”, underlined Dorian Roucher, head of the division Synthèse conjuncturelle of INSEE, at a press conference.

Economy and Finance Minister Bruno Le Maire had already estimated on Sunday that the growth would exceed the 1.7% registered by the government in its bill of finance (PLF) and would probably be “around 1, 8% “.

If this happens, it will be good news for the executive, which will be able to count on additional revenues when it has set itself the objective of reducing the public deficit to 2.9% of GDP this year .

Ⓒ AFP – Sabrina BLANCHARD – | INSEE conjuncture report

For its part, the unemployment rate is expected to fall to 9.4% at the end of the year, down 0.6 point compared to 2016, according to INSEE.

But in the second half of the year, net job creation will clearly slow down, reaching 41,000 jobs, after 154,000 in the first. A consequence of the reduction in the number of contracts assisted decided by the government, which will reduce the number of employees in the non-market sector.

Economic activity will be increased in the second half of the year by the solidity of investment, businesses and “especially households, which still benefit from lower interest rates”, explained Dorian Roucher.

The public body thus expects a 5% increase in household investment over the year, “a growth unprecedented since 2006”.

– Idle power consumption –

Business investment is also expected to accelerate to + 3.9% after + 3.4% in 2016.

The business climate indicator, which reached its highest level since early 2011, signals a “marked optimism on the part of business leaders” as regards their prospects, according to the expert from INSEE .

Moreover, managers report production difficulties caused by the recovery in demand, prompting them to invest in equipment to remedy it.

Other support to the activity, exports are expected to gain momentum and grow by 3.3% after + 1.9% in 2016.

Ⓒ AFP – FRANCOIS GUILLOT – | French Economy Minister Bruno Le Maire, in Paris on October 4, 2017

They should benefit “partly from the resumption of world trade but also from the return of tourists”, whose expenses on the national territory are considered exports in the national accounts, says INSEE. In addition, the “restart of nuclear power plants” that had been shut down for maintenance at the end of last year resulted in the resumption of electricity sales.

Imports are expected to remain strong, especially in capital goods, and increase by 3.9%.

In the end, although the balance of foreign trade will remain negative in 2017, it should weigh less heavily on growth than last year.

For their part, purchasing power and consumption are expected to slow, mainly as a result of the rebound in inflation (1%). However, this should be offset by wage increases, particularly in the civil service as a result of increases in the index point.

Household consumption is expected to slow to + 1.1% after + 2.1% in 2016. Some one-time events particularly boosted it last year, such as the sale of tickets to the European football championship, which stimulated heating spending and the change in television broadcasting standards that pushed the French to buy new equipment.

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