In Short: France signals continued EU recovery


First it was Spain, then Italy and now France is showing accelerating earnings and better-than-expected economic growth. In a word, southern Europe appears to be on the cusp of a meaningful earnings and GDP expansion. Once a laggard among the big European economies, France’s first-quarter GDP gains were revised upward for a second time to 0.5%, matching the pace of the final three months of 2016. The improvement comes amid signs that growth is continuing apace as France’s new president, Emmanuel Macron, enters his second month in office.

There is a clear perception that France is primed for an economic reset. Business confidence has climbed to its highest level in six years and payrolls are expanding. The strong show of support for his En Marche! Party during recent legislative elections give Macron a clear mandate to implement a reform agenda focused on reduced regulation, tax reform and the ability to make labor markets more flexible.

This forward momentum offers the best hope in a long time that France is ready to embrace more competitive and business-friendly policies. In addition, Macron’s pro-European Union stance should allow equity investors to concentrate on the broadening economic recovery rather than fear a potential breakup of the euro. Macron traveled twice to Berlin during his presidential campaign to rev up the Franco-German engine that has been vital to European reform. All told, France’s economic revival bodes well for a more widespread and sustainable eurozone upturn.