Decline in INSEE confidence surveys suggests moderate growth in France this year and the next

France INSEE composite index and Markit PMI index both fell in February. While the later rebounded in March (by nearly 2 points to 51.1), the INSEE business climate index shed another point to its long-term benchmark level of 100. Business confidence eroded the most in industry (down 2 points to 101), while declining 1 point in services (to 99) and holding steady in construction (at 92). In the retail trade sector, confidence regained 3 points to 104.

Despite a fall in oil prices, the euro and interest rates as well as a series of government measures to boost competitiveness and employment, recovery in France remained very mild, with the French GDP growth at an average annual rate of 1.2% in 2015. Another decline in the INSEE confidence surveys for March shows the downside risks that loom over growth.

"According to our estimates, French growth will barely accelerate this year and next, with average annual GDP growth of 1.2% in 2016 (the same as in 2015), followed by 1.3% in 2017," notes BNP Paribas in a report.