Credit Impulse Update: The party is over, France’s GDP is out Credit Impulse Update: The party is over, France’s GDP is out Credit Impulse Update: The party is over, France’s GDP is out

Credit Impulse Update: The party is over, France’s GDP is out

Christopher Dembik

Head of Macroeconomic Research

In our last note about the French economy published in March 2018, we warned against the risk of economic slowdown as a result of contraction in credit impulse and higher rates and higher oil prices. The latest statistics, especially Q2 GDP growth that was out today at 0.2%, seem to confirm this risk and the fact the peak in growth during this cycle was reached in Q4 2017. We expect a pronounced economic slowdown this year with a growth rate around 1.6%-1.7%, which is way below the government’s target (2%). Actually, the biggest threats will start to materialise in 2019, potentially leading to a sharper downturn. We identify three major risks: the potentially negative reaction of financial markets to monetary policy tightening, rising protectionism and the likely increase in oil prices due to the lack of investment in this sector in recent years.

Leading indicators point to lower growth

The growth rebound from 2014 was largely fuelled by strong credit pulse (highest point of 3.9% of GDP reached in Q2 2015) which happened concomitantly with a miraculous alignment of stars for the economy (low rates, low oil prices and weak euro). Now that this impulse has turned down (our proprietary credit impulse comes out at only 0.4% of GDP in Q2 2018), the direct consequence we can expect is a negative shock on confidence, domestic demand and, ultimately, growth.

Explanation: The Credit Impulse indicator developed by Saxo Bank leads economic activity by 9 to 12 months. It represents the flow of new loans issued by the private sector as a percentage of GDP. France’s credit impulse is calculated using credit data from the Bank of France and data on economic activity from INSEE.

In addition, lower PMIs since the beginning of the year tend to confirm the low-growth scenario. For the first time since September 2016, the contraction of new export orders in July is a warning sign that should not be overlooked. It seems that the French economy is starting to feel the adverse effects of rising NEER, which is close to its 2009 peak, even though REER remains relatively low.

We also foresee that a lasting level of a high unemployment rate, reflecting the persistent mismatch between business needs and jobseekers’ qualifications, will constitute a negative factor for consumption. Long-term unemployment increased 7% YoY, while the rate of people who have been jobless for less than a year is declining, which confirms the need for the reform of vocational training promoted by the government. However, it is expected that virtuous effects will take several years to materialise in the labour market.

The Macron effect tends to disappear

In previous months, we talked a lot about the Macron effect. As a matter of fact, it is fading as fast as it appeared. There has been a sharp decline in consumer confidence, partially driven by the negative impact of the government’s fiscal measures, a collapse in the approval rate and lower business confidence from its Q4 2017 peak, though it seems to be more resilient than consumer confidence. 

Back to normal for the French economy

In a way, France’s growth is back to a more normal level taking in consideration its economic fundamentals and its level of potential growth, which is estimated at 1.25% by the Treasury for the period 2017-2020. Basically, a key problem of the French economy is that its recovery was slightly desynchronised with the global economic cycle. It started later than in most European countries and, thus, might be shorter since France will be hit at the same time that the other countries when the next downturn, that could take place in 2020 in the US, will happen.

From 2019, France will face major headwinds: lower global trade, as indicated by leading indicators, such as YoY South Korean exports, and likely higher oil prices as a consequence of under-investment in this sector in recent years. To sum up, France’s optimism that emerged one year ago did not last long. Unfortunately, France's World Cup win will not bring any support to growth.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


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 (

40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. 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
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992