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France Economic Outlook
by Alain Henriot
Delegate Director, Coe-Rexecode
Kiel - 16th March 2010
- 2
1 - A better resilience of the French economy to the crisis than other Euro area countries
-3
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
GDP (in volume terms)
Euro area
France
quarter-on-quarter, %
GDP (in volume terms)
© Coe-Rexecode
y-o-y, %
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
0
-6
-4
-2
0
2
4
6
FranceEuro area
- 3
• What is behind this resilience ?
Lower exposure to industry
Sectoral specialisation led to a less pronounced downturn in industrial production in France than in other Euro area countries
The share of the public sector in the economy has contributed to soften the decline of activity
- 4
• Different phases in the recovery process :
Industrial production index
© Coe-Rexecode
2005=100
2005 2006 2007 2008 2009 2010
70
80
90
100
110
120
ManufacturingManufacture of food productsand beveragesElectrical and electronic equipment; machine equipmentManufacture of transport equipmentOther manufacturing
Phase 1: a global crash (mid-2008 – early 2009)
Phase 2: a strong upturn in the car industry (thanks to public support schemes in many European countries) triggering the supplying industries (2nd and 3rd quarters 2009) ; In the meantime the activity in other sectors (equipment goods) is stabilising at a very low level (-25 % compared to the pre-crisis level)
Phase 3: Beginning of a downturn in the car industry production coupled with a moderate increase in activity on other industries (2009Q4 -2010 Q 1)
Forthcoming: strengthening global output or aborted recovery?
- 5
2 – What can we learn from business surveys?
FranceIndustrial Confidence Indicator
© Coe-Rexecode
Balance in %European Commission
90 92 94 96 98 00 02 04 06 08 10
0
-45
-30
-15
0
15
PMI index - Reuters
97 98 99 00 01 02 03 04 05 06 07 08 09 1030
35
40
45
50
55
60
65
- 6
• What can we learn from surveys? (2)
FranceService Confidence Indicator
© Coe-Rexecode
Balance in %European Commission
90 92 94 96 98 00 02 04 06 08 10
0
-30
-15
0
15
30 PMI index - Reuters
97 98 99 00 01 02 03 04 05 06 07 08 09 1040
45
50
55
60
65
70
- 7
• What can we learn from surveys? (3)
FranceConstruction Confidence Indicator
© Coe-Rexecode
Balance in %European Commission
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
0
-60
-40
-20
0
20
40
- 8
• To sum up, Coe-Rexecode indicator assesses underlying growth at around 1.2% in February against 2.3% three months ago: is it the sign of a slowdown of economic growth?
% annual rate
FranceUnderlying growth
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
0
-6
-4
-2
0
2
4
6
RecessionLow phase of the growth cycle
- 9
France: monthly business survey (goods-producing industries)
Finished-goods inventory level
© Coe-Rexecode
Balance s.a, in %
2005 2006 2007 2008 2009 2010
00
5
10
15
20
25
30
1. Inventories: in the industry, the level of inventories is now considered as very low, it can help to support future stock building
3 – Which engines for economic growth?
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
J anuary 2008
April 2008 J uly 2008 October 2008
J anuary 2009
April 2009 J uly 2009 October 2009
Change in inventories: contibution to GDP growth
France Germany
- 10
• Which engines for economic growth? (2)
2. Private consumption: in 2009, households real disposable income was supported by disinflation. It will not be the case anymore in 2010. Since the beginning of 2010, the planning end of the wreckage premium has been weighing on car sales.
France
© Coe-Rexecode
Chained billion eurosConsumption in manufactured goods
02 03 04 05 06 07 08 09 1017
18
19
20
21
22
23
2.5
2.7
2.9
3.1
3.3
3.5
3.7
Manufactured goods (LHS)Automobiles (RHS)
%Households real disposable
2002 2003 2004 2005 2006 2007 2008 2009 2010
0
-6
-4
-2
0
2
4
6
8
y-o-y, %quarter-on-quarter, %
- 11
• Which engines for economic growth? (3)
3. Investment: the low level of capacity utilisation will hamper the recovery in investment
France
© Coe-Rexecode
%Capacity Utilization Manufacturing
2002 2003 2004 2005 2006 2007 2008 2009 2010 201170
74
78
82
86
90
INSEE survey
- 12
• Which engines for economic growth? (4)
4. Exports: a relief thanks to the depreciation of the Euro in a context of a rather strong world demand
2005=100
France
2002 2003 2004 2005 2006 2007 2008 200970
80
90
100
110
120
130
Export performancePrice competitiveness
Export performance: export volumes/world demand addressed to France
Price competitiveness: national export prices/export prices of competitors
- 13
• Which engines for economic growth? (5)
5. Public investment: it was rather weak in 2009, despite growth support schemes. It was the result of the cities electoral cycle.
France
© Coe-Rexecode
%GFCF General government
2002 2003 2004 2005 2006 2007 2008 2009 2010
0
-12
-9
-6
-3
0
3
6
9
12y-o-y, %quarter-on-quarter, %
- 14
France
© Coe-Rexecode
%
Unemployment
91 93 95 97 99 01 03 05 07 09 117
8
9
10
11
12
2.0
2.3
2.6
2.9
3.2
3.5
Unemployment rate (LHS)Unemployed (thousands of persons) (RHS)
Quarterly changes - thousands of persons
Employment - private sector
91 93 95 97 99 01 03 05 07 09 11
0
-200
-100
0
100
200
4 – What prospect for the labour market?
- 15
• In France, productivity per employee has already returned to the pre-crisis level
© Coe-Rexecode
2008q1=100USA
1 2 3 4 1 2 3 4 12008 2009 2010
94
96
98
100
102
104
106
GDPEmploymentProductivity
2008q1=100Germany
1 2 3 4 1 2 3 4 12008 2009 2010
92
94
96
98
100
102
GDPEmploymentProductivity
2008q1=100France
1 2 3 4 1 2 3 4 12008 2009 2010
94
96
98
100
102
GDPEmploymentProductivity
2008q1=100Euro area
1 2 3 4 1 2 3 4 12008 2009 2010
94
96
98
100
102
GDPEmploymentProductivity
- 16
• Temporary jobs have been back on a rising trend, but it is probably the result of higher demand in the car industry
Thousands of personsFrance: temporary jobs
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 12005 2006 2007 2008 2009 2010
250
300
350
400
450
500
- 17
• Forecast 2010 -2011
Annual change (%) unless otherwise stated 2009 2010 2011GDP -2.2 1.7 1.4Private consumption 0.8 0.9 0.8Total investment -7.0 -1.1 2.4Of which: business investment -7.7 -0.8 2.5 Residential construction -8.1 -3.5 1.7Inventories change (contribution to GDP, %) -1.4 0.8 0Exports -11.2 4.5 5.0Imports -9.7 4.3 4.5Inflation (annual average, %) 0.1 1.2 1.0Current account balance (% GDP) -2.0 -2.1 -2.2Public deficit (% GDP) -7.9 -7.8 -6.9Unemployment rate (average level, %) 9.1 9.9 10.0
- 18
• In conclusion : has the crisis hit the long-term outlook? …
GDP in level termsLevel of potential outputrevised downwardbut potential growth is not revised after an intitial adjustment
Level of potential outputandpotential growth are revised downward
A traditional cyclewith an unusual magnitude
Potential output unchangedthe output gap has to be closedStrong growth to be expected
Crisis
- 19
• … probably yes !
France GDP (in volume terms)
© Coe-Rexecode
Chained billions of euros at annual rate
2002 2003 2004 2005 2006 2007 2008 2009 20101450
1500
1550
1600
1650
1700