INSEE, the French statistical office, will publish at the beginning of next week its last estimation of French growth during the fourth quarter and will permit to have a clear vision of the economic achievements in 2017. The debate, regarding numbers, 1.9 or 2%, is fascinating commentators but doesn’t make a lot of sense since official statistics accuracy is not enough to make the difference. 2% looks better, on an optical point of view, than 1.9%. This result shows a clear improvement compared to the five years of stagnation France has bored between 2012 and 2016. The satisfaction which has accompanied the first estimations is only partly justified because the reached level is unable to make up for the accumulated backwardness in the past, notably regarding employment. Atop of that, this growth is going along with a double disequilibrium. Public deficit is coming down under the 3% level and looses the excessive status defined by European rules but is still high and the trade deficit continues to worsen when, thanks to oil prices fall and the good state of the euro, it should have been reduced.

France is still paying the price of the major economic policy mistakes done in 2012 and 2013 when the government wanted in the same time to reduce public deficits and increase enterprises margins. The fiscal pressure on households was worsened in a context of unemployment rise. That generated a stop for consumption. Enterprises didn’t have any more interest in investing in France to satisfy a deficient demand. They found new excuses to delocalize or to make foreign acquisitions, which didn’t prove to be always very sensible. The purpose of that policy was to reestablish a lost competitiveness. Instead of that, we saw a continuous degradation of French trade balance, excluding energy. The advantage taken from the oil and gas price fall, about 35 billion euro, was lost in four years. That situation does not create, as it was in the past, financial problems because France belongs to the eurozone and German surplus protect again any exchange crisis. But it weighs on growth and employment.

Despite their improvement, 2017 accounts show that our country has not fully emerged from past years difficulties. Foreign trade contribution to growth has still been negative around 0.3% of GDP. Trade deficit has reached 62 billion, 14 billion more than in 2016. Energy bill rose to 39 billion, an increase compared to 2016 but by far lower than the peak reached in 2012 when it represented 69 billion. Household consumption has significantly slowed: 1.3% against a 2% increase in 2016. The legend, consisting in thinking that consumption fluctuations are at the origin of France foreign deficits has been once more invalidated. Enterprises and households investments strongly increased but those realized by the administrations fell by 1%. Regarding enterprises, growth reached 4.4% but it is an average hiding high disparities. The increase in industry was only 1.8% again 6.4% for private services. Construction numbers show very well the nature of the investment rebound. In 2017, only 2.5 million square meters were dedicated to industrial sites, i.e. four times less than offices, commercial centers and warehouses. But it was household investments which have been in 2017 the most dynamic factor of the economy with an increase by 5.4%. Housing starts grew by 15.7%. Families are fully taking advantage of the reduction of interest rates decided by the European Central Bank, which has been, at last, passed on by banks. Families have also got the opportunity to renegotiate their passed loans. Their monthly payments have been reduced and they even got the possibility to proceed to new acquisitions.

The evolution of the industrial activity is still disappointing because it is very unequal between sectors: high in luxury products, in cars, which seem to have stopped the delocalization policy which has caused to French plants the lost of half of their production in ten years and aeronautic construction; on the contrary, it is very weak in wood and paper businesses, textile and mechanic in general. The diversity of these results shows well that it is not an unique cause, always put above, working costs which is at the origin of poor passed results but the numerous strategic mistakes of some big groups and their behavior with their suppliers which have been at the origin of the fall, frequently put in front, of the industry share in the national production.

This modest growth rebound did not have all the expected impact on employment. Unemployment rate, based on International Labor Organization criteria has slowly decreased but the number of unemployed people is still very high and its recent reduction is still highly inferior to what France has known during the rebound period at the end of the Nineties and during the middle of the Twenties. Employment in industry has stabilized and even has started to increase if we include interim jobs which are assigned to it. The rise of the jobs numbers in the building activity (30 000) has been affected by a high level of detached workers and has not profited enough to jobseekers. The main source of job creation is in the services industries, which is consistent with the observed related investments. The French economy is accelerating its tertiarization process.

At the end, the situation of French public finances does not justify the triumphalism which is sometimes appearing. State and public administrations deficit grows less quickly than economic activity, which permits to show off a reduction of the ratio sent to Brussels. But the nature and the level of public expenditures are still open to criticism. Bureaucracy is increasing its scope with the multiplication of new offices and agencies when essential public services as healthcare are lacking of resources. Public assets management is far from being perfect. Hundreds of properties or lands are unoccupied when in the same times new offices buildings dedicated to ministers are built. Shares of companies providing substantial dividends are sold to slow the growth of public debt when, in the same time, its cost is near zero. Against alarming forecasts, long term interest rates are staying below 1%, when the inflation rate staid at 1.2% in 2017 and when the ECB has confirmed that its quantitative easing policy will stop next autumn. The spread with the German bond is at its lowest level for twenty years: 25 basis points. The persistence of public deficits results from a double deficiency: wealth generation is not increasing fast enough to generate fiscal receipts and the “reforms” are not attacking the real costs of the deficits: the excessive working costs of the State and of the too many public communities.

The 2017 results and the trends which are emerging on 2108, which are appearing in the last INSEE forecasts show that the French economy is in a better position but it is still a long way before it is possible to say that it is a good situation.