In France, the consumer may well make his comeback soon, after two difficult years. In May, goods consumption remained subdued (+0.2% m/m excluding energy) but the household confidence index recovered to 99 points, a level last observed one year ago. It went in conjunction with early signs of improving domestic order books in the manufacturing sector (see WERO 24 May 2019). The recovery of household confidence was triggered by fast improving expectations on the future financial situation to a level close to highs reached in mid-2017. Purchasing power expectations (+2.7% in 2019) and the current low level of interest rates are the major triggers. The main consequences are better durable goods purchases and investment prospects: 9.5% of households now plan to buy a new home in the next two years (+1.5pp compared to January, and +2pp above the last 10-year average). It means that residential investment should grow again (+0.5% in 2019 and +2.2% in 2020) after eroding in the last two quarters. These evolutions support our forecast of a gradual GDP growth acceleration from +1.2% in 2019 to +1.5% in 2020.
