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2020, unlikely a repeat of 1995

15 January 2020

By Jean-François Jolivalt, Multi Asset Fund Manager, La Française AM

French protests and transport strikes against the government’s planned pension reforms have been ongoing for more than 40 days now, without precedent in France's recent history. It is not the first time that the country is paralyzed by a nationwide transport union blockage. Recent protests echoed the ones of late 1995, which were also spurred by proposed pension reforms. Back then, the French national statistics bureau, INSEE, estimated that the impact of social unrests was a reduction in GDP of about 0.2% for the last quarter of 1995. At the time, the Paris region was especially affected as were a number of sectors: telecom, energy, education and health. 1995 strikes resulted in lower consumer spending and production disruption.

Today’s concerns about downside risk to the French economy are legitimate. Paris has borne the brunt of the economic slow-down with restaurants, tourism and retail stores suffering the most, especially around the critical Christmas period. Strikes are for sure weighing on consumer confidence. However, the population has adapted to the situation thanks to e-commerce, remote working, carpooling and car sharing, which are all services or alternatives that are now widely accepted and available.

Business surveys and other advanced French economy indicators are holding up, especially when compared to other European economies. Despite the global manufacturing slowdown, French economic data does not point to any major drag on the industrial sector. Germany, however, is feeling the pain. Additionally, the latest Ernst & Young industrial barometer named France as the most attractive country in Europe.

French Finance Minister, Bruno Le Maire, recently commented that transport strikes would have little impact on growth and employment; an analysis we share. Overall, we expect 4Q19 GDP to grow approximately +0.3%. A compromise between the French government and reformist unions was found last week. This latest development is a positive step and paves the way to an end in the strikes. However, if both parties fail to reach an agreement and protests continue, growth could remain tilted to the downside with more clouds on the horizon.

Disclaimer
This commentary is intended for NON-PROFESSIONAL investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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