In France, business confidence surveys are pointing to a deterioration mainly driven by foreign demand. The manufacturing confidence index decreased to 102 points in June, taking the Q2 average to the lowest level since Q3 2016. Export orders deteriorated markedly in June, at the steepest pace since H1 2013, particularly in the automotive value added chain (carmakers, car suppliers, metals) and in highly cyclical sectors such as electronics and chemicals. At the same time, French corporates continue to feel inventory pressures as a result of lower demand, but the sectors impacted have evolved. Carmakers’ inventories returned to a “normal” level, but car suppliers still have inventories above their long-term average; and electronics have joined this club. At the same time, the retail sector did not see any improvement in sentiment, with an overall confidence index below par (97) with the strongest deterioration in food retailers. Finally, services and construction still experience a good situation and will probably be the main winners from expected higher household spending resulting from fiscal stimulus, allowing GDP growth to reach +1.2% in 2019.
