France Economic Outlook
by Alain Henriot
Delegate Director, Coe-Rexecode
Kiel - 16th March 2010
1 - A better resilience of the French economy to
the crisis than other Euro area countries
GDP ( in volu me t er ms)
quarter-on-quarter, %
GDP (in volume t erms)
6
y-o-y, %
1.5
1
4
0.5
0
2
-0.5
-1
-1.5
Euro area
France
0
France
Euro area
-2
-2.5
-2
-3
-4
-6
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
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• 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
-3
•
Different phases in the recovery process
:
I n dust r ia l pr oduct io n in dex
120
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?
2005=100
110
100
90
80
Manufacturing
Manufacture of food products
and beverages
Electrical and electronic equipment;
machine equipment
Manufacture of transport equipment
Other manufacturing
70
2005
2006
2007
2008
2009
2010
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2 – What can we learn from business surveys?
Fr an ce
I n dust r ia l Con f id en ce I n dic at or
E u ro p e a n Co mmisio n
15
P MIin d e x-Re u te rs
Balance in %
65
60
0
55
50
-15
45
40
-30
35
-45
30
90
92
94
96
98
00
02
04
06
08
10
97
98
99
00
01
02
03
04
05
06
07
08
09
10
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•
What can we learn from surveys? (2)
Fr an ce
Ser vic e Con f id en ce I n dic at or
Eu ro p e a n Co mmisio n
30
PMIin d e x-Re u te rs
Balance in %
70
65
15
60
0
55
50
-15
45
-30
40
90
92
94
96
98
00
02
04
06
08
10
97
98
99
00
01
02
03
04
05
06
07
08
09
10
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•
What can we learn from surveys? (3)
Fr an ce
Con st r uct io n Con f id en ce I n dic at or
Eu ro p e a n Co mmisio n
40
Balance in %
20
0
-20
-40
-60
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
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•
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?
France
Underly in g growth
6
% annual rate
4
2
0
-2
-4
-6
2001
Low phase of the growth cycle
Recession
2002
2003
2004
2005
2006
2007
2008
2009
2010
-8
3 – Which engines for economic growth?
1. Inventories: in the industry, the level of inventories is now
considered as very low, it can help to support future stock
building
Fr an ce: mon t hly busin ess sur vey
( goods- pr oducin g in dust r ie s)
Fin is hed- goods in ven t or y le vel
Change in inventories: contibution to GDP growth
2
1.5
30
Balance s.a, in %
1
25
0.5
0
20
-0.5
15
-1
-1.5
10
-2
5
-2.5
January April 2008 July 2008
2008
October
2008
January April 2009 July 2009 October
2009
2009
0
2005
2006
2007
2008
2009
2010
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France
Germany
-9
•
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.
Fr an ce
Households real disposable
C o n su mp tio n in ma n u fa c tu re d g o o d s
%
8
23
Chained bilion euros
3.7
Manufactured goods (LHS)
Automobiles (RHS)
6
22
3.5
21
3.3
20
3.1
19
2.9
18
2.7
4
2
0
-2
y-o-y, %
quarter-on-quarter, %
-4
-6
17
2002
2003
2004
2005
2006
2007
2008
2009
2010
2.5
02
03
04
05
06
07
08
09
10
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•
Which engines for economic growth?
(3)
3. Investment: the low level of capacity utilisation will hamper
the recovery in investment
Fr an ce
Capacity Utiliz ation Manufa cturing
90
%
86
82
78
74
70
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
INSEE survey
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•
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
France
130
2005=100
120
110
100
90
Export perfo rm ance
Pri c e competi ti v eness
80
70
2002
2003
2004
2005
2006
2007
2008
2009
Export performance: export volumes/world demand addressed to France
Price competitiveness: national export prices/export prices of competitors
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•
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.
Fr an ce
GFCF Genera l government
%
12
y-o-y, %
quarter-on-quarter, %
9
6
3
0
-3
-6
-9
-12
2002
2003
2004
2005
2006
2007
2008
2009
2010
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4 – What prospect for the labour market?
Fr an ce
E mp lo yme n t-p riv a te se c to r
200
U n e mp lo yme n t
Quarterly changes - thousands of persons
12
%
3.5
11
3.2
10
2.9
9
2.6
100
0
-100
2.3
8
Unemployment rate (LHS)
Unemployed (thousands of persons) (RHS)
-200
2.0
7
91
93
95
97
99
01
03
05
07
09
11
91
93
95
97
99
01
03
05
07
09
11
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•
In France, productivity per employee has
already returned to the pre-crisis level
USA
Euro are a
20 8q1=10
106
20 8q1=10
102
104
100
102
100
98
G DP
Employment
Productivity
98
94
96
G DP
Employment
Productivity
96
1
2008
2
3
4
1
2009
2
3
4
1
2010
94
1
2008
2
3
4
Germ any
102
1
2009
2
3
4
1
2010
2
3
4
1
2010
Fra nce
20 8q1=10
102
100
20 8q1=10
100
98
98
96
G DP
Employment
Productivity
94
92
1
2008
2
G DP
Employment
Productivity
96
3
4
1
2009
2
3
4
1
2010
94
1
2008
2
3
4
1
2009
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•
Temporary jobs have been back on a rising
trend, but it is probably the result of higher
demand in the car industry
France: temporary jobs
500
Thousands of persons
450
400
350
300
250
1
2005
2
3
4
1
2006
2
3
4
1
2007
2
3
4
1
2008
2
3
4
1
2009
2
3
4
1
2010
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• Forecast 2010 -2011
2009
2010
2011
GDP
-2.2
1.7
1.4
Private consumption
0.8
0.9
0.8
Total investment
-7.0
-1.1
2.4
Of which: business investment
-7.7
-0.8
2.5
Residential construction
-8.1
-3.5
1.7
Inventories change (contribution to GDP, %)
-1.4
0.8
0
Exports
-11.2
4.5
5.0
Imports
-9.7
4.3
4.5
Inflation (annual average, %)
0.1
1.2
1.0
Current account balance (% GDP)
-2.0
-2.1
-2.2
Public deficit (% GDP)
-7.9
-7.8
-6.9
Unemployment rate (average level, %)
9.1
9.9
10.0
Annual change (%) unless otherwise stated
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•
In conclusion : has the crisis hit the long-term outlook? …
GDP in level terms
Level of potential output
revised downward
but potential growth is not revised
after an intitial adjustment
Level of potential output
and
potential growth
are revised downward
A traditional cycle
with an unusual magnitude
Potential output unchanged
the output gap has to be closed
Strong growth to be expected
Crisis
- 18
•
… probably yes !
Fr an ce GDP ( in volu me t er ms)
1700
Chained billions of euros at annual rate
1650
1600
1550
1500
1450
2002
2003
2004
2005
2006
2007
2008
2009
2010
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