French GDP resilient to Yellow Vests, but Christmas spending hit

French economic growth in the final quarter of the year remained surprisingly resilient to disruptions from the Yellow Vests protests that have swarmed around the country.

France's gross domestic product rose 0.3% in the fourth quarter compared to the previous three-month period, according to an initial reading from the Insee stats office.

This rate of growth was unchanged from the third quarter and so well ahead of the 0.1% that the market expected and meant GDP grew 1.5% in 2018 after 2.3% in 2017.

Domestic demand decelerated across the board, contributing 0.1 points to GDP growth, after 0.5 points in the previous quarter, with household consumption spending slowing to 0.0% after 0.4% growth in the third quarter.

December consumer spending figures were also published, showing a 1.5% month-to-month fall at the end of the year, well below the consensus for a 0.3% fall. The year-on-year rate slipped to -2.3% from a revised -1.5% in November.

Imports bounced back to 1.6% growth in the fourth quarter after falling 0.7% in the third, while exports accelerated to 2.4% from a flattish previous quarter.

All in all, the foreign trade balance continue to contribute positively to GDP growth, adding 0.2 points follwing the prior quarter's 0.3 points.

Economists at Barclays said the 'flash' print showed the French economy had remained resilient to disruptions from the Yellow Vests movement. "We think demand was better than we had expected mainly because of resilience in services, while manufacturing in both expenditure components fell sharply. This is a key reassuring factor for outlook. We also note a surprising non-insignificant pick-up in public expenditure."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the poor December consumer spending number reflected a 1.9% month-to-month plunge in spending on engineered goods, driven by a huge 3.8% drop in durable goods spending.

"We suspect that Christmas sale disruptions around the yellow vests protests were partly to blame, but the statistical office also emphasis that that the big fall in new car purchases were affected by the anticipation of a new more favourable scrapping scheme in January. Elsewhere, spending on clothing fell a bit, by 0.3%, but food and energy consumption also registered large losses, the latter in part thanks to a relatively mild December."

Looking ahead, Vistesen was "almost certain" that the data was not representative of the underlying trend in French consumers’ spending. "Indeed, such as it is, we would see them as a favourable base for a pick-up in Q1. Spending on goods, including energy and good, fell 0.7% quarter-on-quarter in Q4, but we expect much better in H1."