In the second quarter of 2019 the French manufacturing sector defied gravity, growing by +1% y/y despite an output contraction in other key Eurozone economies. However, the French momentum was not broad-based and is weakening. In July, car output (-4.1% y/y) as well as transport equipment (-4.3%) decreased. This went in conjunction with more structural setbacks: Food output was -3% below its 2017 peak, as well as plastics (-6.6%) and metals (-6%). Plastics and metals are involved in car and transport equipment supply chains, indicating the depth of concern in several transport sectors (cars and aircrafts in particular). The pressure on food suppliers has a key impact on the agrifood and food retail sectors and is a byproduct of household spending choices: budget constraints arising from food inflation (+3.2% y/y in August) and priorities given to housing and household equipment. Overall, the data shows the deep impact of subdued demand for food and cars on suppliers. Transport equipment is something new and suggests that the currently ongoing deceleration in global growth and trade could last for longer.
