World trade, seen from developed countries, is now at risk. The average export orders (Markit) of the USA, Japan and Euro zone fall to 48.6. The braking action is terrible. If China slows further, the global economy will be stifled.
For French households, the future has darkened during the last two months. The household confidence index plummeted in December and households’ perception of their own situation or that of all French people is at a very low level, not necessarily very different from that observed during the post-Lehman shock period. 2008/2009.
This is a measure of the feeling of what is happening in France today. The difference is that in 2008/2009 the shock was external and in a way it was enough to wait for the effects to fade.
Today the shock is endogenous, it has its source in the very dynamics of French society. When we look at the year-on-year change in the household confidence index, we can see that the shock is stronger than in the winter of 1995 when the French economy froze.
The consequence is that households can no longer project themselves into the future. The perception of their own situation is very degraded leading to a more wait-and-see attitude, leading to a deterioration of the economic situation, feeding a vicious circle.
To get out of it, the government must propose measures in rupture that could change very quickly everyone’s perspective to avoid dramatic political excesses. It is he who has the responsibility and it is certainly not by accentuating the tax burden that the solution will be found.
2019 will be exciting on the economic and financial ground. It has, from the outset, its share of uncertainties but will have, throughout the coming months, unexpected surprises.
It is this dynamic that we will follow together in the coming quarters.
I wish you, your family and relatives, the best on both personal and professional success.
Have a great year
The price of oil is, on December 19, 20% below its 2018 average. The contribution of energy to the inflation rate will quickly be negative. Inflation will fall below 1% in the euro zone in 2019. (The energy price is the main source of fluctuations of the inflation rate. Sometimes on the upside sometimes on the downside. Currently it’s on the downside)
For a zero contribution to inflation, on average over 2019, the price of oil should increase by 25% It is only above this 25% increase, on average in 2019, that inflation will go above underlying inflation (close to 1%). No rush for the ECB to change its mind on monetary policy
This post is available in pdf format My Wedenesday Column – November 7
US job growth is buoyant, but is it all down to the Trump effect?
The US economy created 250,000 jobs in October, which is a bit higher than the average of 213,000 witnessed since the start of the year. However, October is usually a fairly good month for new job creation, with 271,000 in October 2017, and an average of 246,000 in the month of October since 2013 as compared to an average of 206,000 for other months.
The labor market is buoyant overall, reflecting a solid pace of economic growth although nothing to write home about with 2.25% per year on average since 2011. Continue reading