France H2 15 growth to be driven by domestic factors

In terms of exports, momentum in France manufacturing output remains unconvincing. Looking through the quarterly volatility, manufacturing production has remained broadly flat for the past three years. For Europe as a whole, the slowdown in emerging economies should also affect France, although not directly. France's GDP is skewed heavily towards final consumption expenditure (c.80% which includes both private and public) and its exposure to China, Russia and Brazil is low (c7% of goods trade). 

Downside is likely to materialise via indirect trade channels (Germany and other open economies), with lower export volume growth (and possibly also via confidence) and the financial markets channel. In conclusion, a negative trade contributions in H2 15 is likely, argues Barclays.

Ongoing resilient business (and consumer) confidence prints nonetheless suggest a return to growth in Q3/Q4. This should be driven by domestic demand and most particularly private consumption thanks to continued employment gains, low inflation and only moderate fiscal tightening.

Separately, an historical improvement in the goods trade deficit in Q2 15 (€4.2bn to -€4.0bn) led to a current account surplus for the first time since Q4 11. The national account data hint that import prices for food, transport equipment and gas and electricity have played a significant role since early 2012, suggesting more structural factors are at play than the recent fall in oil prices. It looks like these will support the current account surplus until the end of the year, says Barclays.