Details Cookies
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Credit Impulse Update: France’s best days are already behind us Credit Impulse Update: France’s best days are already behind us Credit Impulse Update: France’s best days are already behind us

Mr. Credit is fueling France’s growth

Macro 5 minutes to read
Christopher Dembik

Head of Macroeconomic Research

Summary:  France’s economy will be more resilient this year than the rest of the eurozone due to a strong inflow of credit and fiscal stimulus. However, the country has not fully taken advantage of the low-interest rate environment to move upmarket and we fear that layoff plans are coming in industries that are most vulnerable to the international context.

In the coming months, France’s economy will continue to outperform the rest of the euro area, especially Germany. We expect growth to reach 1.2% in 2019 versus 1.3% according to the latest update of the Bank of France. This positive trend is mostly due to four factors: strong inflow of credit, less international exposition, fiscal stimulus, and better household confidence.

Credit remains a key driver fueling the economy, like in previous years.

The 3-month moving average of bank loan growth is close to its post-crisis high, at 5.3% YoY in May. Looking at the flow of new credit, which leads the real economy by 9 to 12 months and is therefore an important leading indicator of GDP growth, the picture is also bright. Based on our proprietary model, the flow of new credit reached 1.32% of GDP in Q1 2019, which is way above the average of the eurozone, at 0.47%, and higher than Germany which stood at 0.41%. As we can see in the chart below, the impulse of new credit is highly correlated with the INSEE business survey, which is itself one of the most reliable leading indicators of the French GDP (R^0.90). The survey is well-oriented, moving upwards at 105.9 in Q2 2019, confirming our positive macroeconomic view for the French economy in the short and medium-term.
France Credit Impulse
France Credit Impulse
France is less exposed than Germany to negative global trade growth trend, China’s slowdown and Turkey’s credit crunch.

The fiscal stimulus of about 10 billion USD in response to the Yellow Vest protests along with the 5 billion tax cuts have lifted consumption. Though some have been directed, as it is traditionally the case in France, to precautionary savings, it will serve as a cushion in 2020 when the expected deterioration of the international situation will impact more the French economy.

Households are slightly more confident regarding the future. Based on the latest INSEE consumer confidence survey of June, only 16% of respondents declared they are afraid of rising unemployment in the next twelve months versus a peak reached 32% in past January.
France Credit Impulse
The bottom line is that France has not yet fully taken advantage of the current low-interest environment to innovate. We fear that, at the microeconomic level, some sectors could be hurt hard in coming months due to negative external headwinds. 

Over the past years, many parent companies have borrowed money at low cost on the financial market to finance subsidiaries abroad that did not benefit from such favorable financing conditions, which largely explains the sharp rise in gross indebtedness of French companies (roughly estimated to 175% of GDP according to S&P Global Ratings). However, this increase in debt also hides a growing and intense activity of mergers and acquisitions, which has been detrimental to investments in research and innovation. France’s inability to move upmarket essentially explains its difficulties to gain market share abroad. This M&A risk-taking strategy could even weaken companies that are not able to fully integrate new entities _ leading as we all know to higher costs in the short term _ before the next economic crisis will pop up. On the top of that, in the country of Socialism, it underlines the increasing power of shareholders on top management’s strategy and the quest for short term high returns which are often at the expense of long-term investment strategy. 

Partially related to the inability to adapt to the production of goods to the best international standards, we fear that some industrial sectors will be very vulnerable to current downside risks to global growth. The feedback we have from leading lending institutions financing industrial projects in France and from local businessmen is that some industrial sectors may face heavy layoff plans in coming months if the global economic situation does not improve substantially. The main area of tensions is concentrated in the automotive industry and especially at the level of suppliers and service providers. If this risk materializes, we doubt that the government will be able to react appropriately and efficiently. The French government’s track record to deal with massive industrial layoff plans is not very good and things have not really changed with the current government, especially because it has not been able so far to formalize a coherent and sound industrial policy for the country. Finally, Macron’s low political capital since the Yellow Vest crisis will constitute a constraint on the government’s actions, whether to implement new reforms or deal with economic challenges. 


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.