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transcript
Economic Conditions in France Prospects for 2014-2015
Hervé LE BIHAN
Banque de France
EUI nomic Workshop
April 2014
1
Overview
Outline
• Short -term outlook
• The fiscal context
• Prospects for the components of demand
• Inflation
• Summary of recent forecasts
2
Short-term outlook
• Mild recovery is under way
• GDP just reached its 2008 level
3
95
96
97
98
99
100
101
95
96
97
98
99
100
101
2007 2008 2009 2010 2011 2012 2013
GDP (Index, 2008q1=100)
Short-term outlook
• Surveys point to picking-up of activity
• Latest BdF short-run forecast for GDP in 2014 Q1: +0.2% (q-o-q)
4
-2.0
-1.6
-1.2
-0.8
-0.4
0.0
0.4
0.8
1.2
1.6
-2.0
-1.6
-1.2
-0.8
-0.4
0.0
0.4
0.8
1.2
1.6
2010 2011 2012 2013 2014
INSEE Personal production expectations
BDF Production expectations
PMI New orders
Production expectations in INSEE, BDF and PMI manufacturing surveys
(standardized data)
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2010 2011 2012 2013 2014
INSEE BDF PMI
France: Business climate indicators in industry(standardized data)
• Caveats: Prospects are gloomy for residential investment over the several quarters ahead
• Low consumption growth expected in Q1 following spike in Q4 driven by temporary factors
The Fiscal Challenge
5
• Government Deficit 2013 (EDP notification ) : 4.3% of GDP
• Some consolidation through higher taxes in 2012 and 2013
• Tax receipts disappointing in 2013
• So far curbing of expenditure/GDP ratio not started
2010 2011 2012 2013
Total receipts 49.5 50.7 51.8 52.8
Total expenditures 56.6 55.9 56.7 57.1
Balance –7.0 –5.2 –4.9 –4.3
Fiscal Developments (% of GDP)
The Fiscal Outlook
6
• Two main goals of current fiscal policy
Spur competitiveness of the French economy Fiscal consolidation
• On competitiveness side, strategy in place since 2013-2014 the CICE €20bn targeted cut in labor cost (Corporate Tax Credit) – gradually implemented Financed by VAT increase, spending decreases. • New Government appointed 31 March
• Details on fiscal plans just released on 23 April: Stability Program for 2014-2017
The Fiscal Challenge
7
• Details on fiscal plans just released on 23 April: Stability Program for 2014-2017
• Includes the ‘Responsibility and Solidarity Pact’ further cuts in social contributions (€10bn)- targeted towards wages <3.5 SMIC. employee social contribution (cut €5bn )
• Plus: overall consolidation through spending restrictions. Among anouncements: local government spending, health insurance, freezing of social benefits and civil servant general wage increases. Amounting to €50 bn (2.5% of GDP) at horizon 2017. Public spending planned to be nearly frozen in volume
• Main issues: Will spending restrictions fully materialize? Will response of private investment and employment offset adverse effect of
consolidation?
Components of aggregate demand: consumption
• Household Saving Ratio, relatively high and stable since the crisis.
8
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Saving ratio
Components of aggregate demand: corporate investment
Conflicting factors Real interest rates are historically low, uncertainty has arguably diminished NFC margin rate at historical low. Corporate Debt at historical high
9
27
28
29
30
31
32
33
27
28
29
30
31
32
33
00 01 02 03 04 05 06 07 08 09 10 11 12 13
NFC Margin rate (%)
• CICE and Responsibility Pact aim to restore investment through profit margin improvement
16.4
16.8
17.2
17.6
18.0
18.4
18.8
19.2
16.4
16.8
17.2
17.6
18.0
18.4
18.8
19.2
2005 2006 2007 2008 2009 2010 2011 2012 2013
Corporate Investment/Value Added ratio (%)
Corporate Investment/Value Added ratio NFC margin rate
Trade
• Export performance : some recent flattening
• After protracted loss in market share.
10
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Export performance
(ratio of export to world demand)
Low Inflation
11
-1
0
1
2
3
4
5
-1
0
1
2
3
4
5
2008 2009 2010 2011 2012 2013 2014
HICP InflationHICP Core inflation
Inflation (%, yoy)
Low Inflation
12
-10
-8
-6
-4
-2
0
2
4
6
8
-10
-8
-6
-4
-2
0
2
4
6
8
2007 2008 2009 2010 2011 2012 2013
Import DeflatorValue-Added Deflator
Import and Value Added deflators (%, y-o-y)
Wages
13
-1
0
1
2
3
4
-1
0
1
2
3
4
2005 2006 2007 2008 2009 2010 2011 2012 2013
Base wageAverage per head wage
Inflation (HICP)
Nominal Wages (yoy %)
March 2014 Low inflation surprise
14
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3
2013 2014
HICP InflationHICP Core inflation
Inflation (%, yoy)
VAT increase
in Jan 2014
• March low inflation outcome: mild climate conditions & unprocessed food; rebates in cars
• But also pass-throuh of VAT seems over (reflecting the tax Credit?)
Some recent forecast
• Some Forecasts
15
GDP ( %)
Gov. Balance (% GDP)
Inflation (%)
2014 2015 2014 2015 2014 2015
EC (Winter Forecast) 1.0 1.7 -4.0 -3.9 1.2 1.2
IMF 1.0 1.5 -3.7 -3.0 1.0 1.2
OECD 1.0 1.6 -3.7 -3.0 1.2 1.2
Government (Stab Prog.) 1.0 1.7 -3.8 -3.0 1.2 1.5
Consensus Fcast (April 14) 0.9 1.3 - - 1.0 1.3
Some recent forecasts
• GDP growth forecast dispersion
16
2014
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3 CF (max)*
CF (min)*
Consensus Forecast mean(0.86)
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
Programme de stabilité 2014-2015 (1.0)
0.8
1.0
1.2
1.4
1.6
1.8 CF (max)*
CF (min)*
Consensus Forecast mean (1.25)
0.8
1.0
1.2
1.4
1.6
1.8
Programme de stabilité 2014-2015 (1.7)
2015
17
Appendix
National Accounts Q4
18
2012 2013 MOYENNE Acquis GLISSEMENT
ANNUELLE fin ANNUEL AU T4
I II III IV I II III IV 2011 2012 2013 2013T4 2011 2012 2013
OFFRE ET DEMANDE
Produit intérieur brut 0.1 -0.3 0.2 -0.2 0.0 0.6 -0.1 0.3 2.0 0.0 0.3 0.3 1.5 -0.3 0.8
Importations 0.7 0.2 0.0 -1.2 -0.1 1.4 0.9 0.7 5.3 -0.9 0.8 1.3 1.0 -0.3 3.0
Exportations 0.4 0.4 0.4 -0.8 -0.5 2.3 -1.1 1.3 5.6 2.5 0.8 1.0 5.1 0.3 2.1
Consommation des ménages 0.5 -0.6 0.1 0.0 0.1 0.3 0.0 0.4 0.5 -0.4 0.3 0.4 -0.7 0.0 0.8
Consommation des APU 0.6 0.4 0.4 0.4 0.4 0.7 0.3 0.5 0.5 1.4 1.8 0.7 0.5 1.8 1.8
Investissement total -1.2 -0.3 -0.6 -0.9 -0.7 -0.3 -0.3 0.5 3.0 -1.2 -2.1 0.1 2.6 -3.0 -0.9
dont : Investissement des SNF-EI -1.5 -0.5 -0.9 -1.1 -0.9 -0.1 -0.3 0.9 3.1 -1.9 -2.3 0.5 1.9 -3.9 -0.4
Investissement des ménages -0.7 0.0 -0.5 -1.0 -1.3 -1.5 -0.7 -0.4 2.3 -0.4 -3.8 -1.1 1.8 -2.1 -3.9
Investissement des APU -1.0 0.2 -0.1 -0.4 0.5 1.0 0.4 1.0 0.3 -0.6 1.4 1.2 3.0 -1.3 2.8
Demande intérieure totale 0.2 -0.4 0.1 -0.4 0.1 0.4 0.5 0.2 2.0 -0.9 0.3 0.5 0.4 -0.5 1.1
19
92
94
96
98
100
102
104
106
92
94
96
98
100
102
104
106
2009 2010 2011 2012 2013 2014
IPI in manufacturing (monthly, 2010=100)
IPI in manufacturing (quarterly average, 2010=100)
IPI in manufacturing in Q1 (carry-over after February)
Evolution of manufacturing production
92
94
96
98
100
102
104
106
92
94
96
98
100
102
104
106
2009 2010 2011 2012 2013 2014
IPI in manufacturing (monthly, 2010=100)
IPI in manufacturing (quarterly average, 2010=100)
IPI in manufacturing in Q1 (carry-over after February)
Evolution of manufacturing production
Housing starts and HH investment
20
14
16
18
20
22
24
26
300
400
500
600
2002 2004 2006 2008 2010 2012 2014
Housing starts (number of dwellingsx12, sa, RHS)
Housing starts, 12 month average (number of dwellingsx12, sa, RHS)
Houshold investment in construction (M€, LHS)
Housing starts, February (x12) : 275 796
Housing starts, 12 m average, February (x 12) : 327 932
Houshold investment in construction, Q4 2013 : 16 484
21
Unemployment Rate
22
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
00 01 02 03 04 05 06 07 08 09 10 11 12 13
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