INSEE expects a moderate recovery in activity in 2019

The latest outlook note from French national statistics body INSEE (full-length version in French, English summary available here) suggests that the French economy will not be affected on a sustainable basis by the recent wave of social unrest in the fourth quarter of the year. The pace of growth over the first half of 2019 fits with the trend witnessed since 2013, apart from 2017, which was an exceptional year.We can see this return to normal on the chart below, showing the half-on-half change in economic activity as reflected by GDP. The pace has returned close to pre-2017 stats and growth is near its potential rate. In these figures, average growth is set to come to 1.5% in 2018 and carry-over at the end of 1H 2019 at 1%.

We can see this return to normal on the chart below, showing the half-on-half change in economic activity as reflected by GDP. The pace has returned close to pre-2017 stats and growth is near its potential rate. In these figures, average growth is set to come to 1.5% in 2018 and carry-over at the end of 1H 2019 at 1%.

France: the growth momentum is lower than expected

The French government is still expecting a robust recovery for the last three months of 2018 and for 2019. Companies’ surveys for October do not allow such optimism. 
The main point is the rapid slowdown in the manufacturing sector. It was the leading sector in 2017 and its dynamics was an important contributor to the strong expansion seen this year. It was a source of impetus for the rest of the economy. 
Its current lower momentum is a source of concern. The retail sales sector is weak reflecting question on purchasing power for every French consumer.
My expectations is that the French economy is back to the trend seen before 2017. It means that the forecast for GDP growth is close to 1.4%. This is consistent with what these surveys say. No strong recovery is expected and the French economy will converge to its potential growth which is lower than 1.5%.
The following graph shows the transitory recovery of 2017.france-semester growth.png 

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Germany and France on a slower momentum

According to companies’ survey in Germany and in France the economic activity was marginally down in August. German’s companies were a little more pessimistic for the 6 month period to come.
Even if levels are different we perceive in the following graph that there is a kind of stability in economic activity during the last twelve months. This synchronization of the business cycle suggest that France and Germany cannot really expect a stronger growth momentum in the short run. In other words, it seems that German and French economic activity are not able to accelerate from their current level. It’s not worrisome for Germany as its unemployment rate is low but it is problematic for France as its unemployment rate is just below 10%. As there is no impulse from outside as world trade trend is flat, it means that the impulse must come from inside. The ECB has done the job so we must expect a more proactive fiscal policy in order to jump on a higher trajectory. Continue reading

Weekly Column: What can we Learn from the Week of the 24 November?

Every  Monday, I record a podcast in French (here) on macroeconomic news of the previous week and on macroeconomic news expected for the week to come.
The translation in English of the podcast can be found below

Four points have to be mentioned in the week beginning on November the 24th

The first point is the absence of commitment on production at the OPEC meeting in Vienna (November the 27th). The downward impact on oil price was strong. The Brent is now priced circa USD 70. Since the beginning of the year, the price is down by -36% in dollar and by almost 30% in euro.
This will have a positive impact on activity for developed countries and it will be a strong support for a recovery, specifically in the Euro Area. We do not expect a rapid change in behavior. The last meeting does not provide elements that could lead to a rapid convergence of interest. Continue reading

Three graphs on the French Economy after the INSEE survey

The French survey published this morning by INSEE shows a drop in economic activity in August. The index level is now 91 (with an historical average at 100 and a standard error at 10). It is the same level than in August 2013.
These figures can be consistent with a small GDP contraction in the third quarter. As European surveys appeared weaker in August, it is not possible to expect an short term positive impulse coming from French main trading partners. The French economy must be boost from inside to gain some autonomy in its growth process.
The new economy minister, Emmanuel Macron, have a huge task in front of him. Continue reading

In France, the rebound for household and business is long to come

Consumer confidence released this Tuesday, May 27 is stable at 85 which is 15 points below its historical average of 100 (by construction).
For several years now (summer 2008) the indicator remains below its historical average. Is this historical average still relevant to analyze consumers’ behavior or is there a break in the process? That’s a question. Moreover this change is concomitant with long inflection in the purchasing power per unit of consumption. In other words, is the French economy characterized by a new period of low growth, more limited gains for the purchasing power or is it just a long and difficult path but which ultimately only be temporary? In other words, should we define a “new normal» for the French economy? Continue reading

France – INSEE survey shows gloomy prospects

The French business climate index published by INSEE was stable in November. Its level of 95 is 5 points below its historical average which is by construction at 100. We see on the chart that the index is below 100 since September 2011.
Details of the survey do not show rapid improvement in the coming months. The Industry sector which is a good proxy for GDP short-term dynamics is stable since last August and details on this sector do not suggest a rapid improvement. Orders remain low, lower than their historical average. Companies’ expectations for their own business were lower in November than in October and are now lower than their historical average. Continue reading