The business confidence index came in at 101 points in April, the lowest level since June 2015, signaling that French corporates are facing higher inventories. Stocks of finished goods increased from March and have been kept at high levels in April. This rise came after two straight months of growth in manufacturing production (January-February) in an expected catch-up of demand after stagnation in Q4. But that catch-up did not happen since, e.g., domestic consumption in goods stalled in January-February. As a result, the production index of the business confidence survey deteriorated markedly in April. Carmakers, car suppliers, chemicals and metals are the most impacted sectors, all of which also face a very high level of inventories. Overall, after quarters of steady investment growth, the capacity utilization rate decreased to 84.4% (it was 85.3% one year ago) which indicates that supply-side tensions have eased somewhat, despite recruitment problems in some sectors such as construction. Overall, these latest developments give some traction to our +1.2% GDP growth scenario for 2019.
