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Households and companies should, little by little, regain confidence thanks to the following factors: progress achieved on the front of structural reforms, the relative improvement in the international environment, the accommodative monetary and financial conditions and the low level of inflation. These support factors will likely offset the deterioration in the domestic environment, primarily due to fiscal tightening and the rise in unemployment. After coming in at zero in 2012, growth will likely do the same in 2013. In 2014, as tailwinds build up and headwinds slightly decline, we expect growth of 0.9%.
One foot in recession
In 2012, the economy flirted with recession. Indeed, revisions of quarterly national accounts ultimately showed that GDP contracted slightly for two straight quarters, down 0.1% in Q1 and Q2, i.e. the technical definition of a recession. These two quarters, however, bookended quarters of moderate positive growth, leaving, as a result, an economy mired in stagnation. But this resilience to the downside ended in Q4 since GDP recorded a significant 0.3% drop, driving year-on-year growth under the zero threshold at -0.3%. On an annual average basis however, growth did not move into negative territory, coming in at zero.
The contraction in GDP in Q4 2012 was due to the faster pace of the decline in investment that outweighed the slight growth in consumption and the positive contribution of net exports. The contraction in GDP was accordingly mitigated and was far less pronounced than in the rest of the Eurozone which, as a whole, retreated 0.6%. This is an advantage of the French economy’s inertia.
After a tough end to 2012, the outlook for 2013 is hardly promising. Confidence surveys remain bad. With respect to activity, January data covering industrial output and retail sales recorded a severe backlash, falling 1.2% and 0.8%, respectively, after their artificially good performance in December when they rose 0.9% and 0.2%. Industrial output, accordingly, posted a negative carry-over of 0.7% in Q1 while the same figure for real household consumption expenditures on goods is -0.6%. A renewed contraction in Q1 GDP therefore seems likely and we forecast a 0.1% decline.
BY Hélène BAUDCHON
To Read the Entire Report Please Click on the pdf File Below.
One foot in recession
In 2012, the economy flirted with recession. Indeed, revisions of quarterly national accounts ultimately showed that GDP contracted slightly for two straight quarters, down 0.1% in Q1 and Q2, i.e. the technical definition of a recession. These two quarters, however, bookended quarters of moderate positive growth, leaving, as a result, an economy mired in stagnation. But this resilience to the downside ended in Q4 since GDP recorded a significant 0.3% drop, driving year-on-year growth under the zero threshold at -0.3%. On an annual average basis however, growth did not move into negative territory, coming in at zero.
The contraction in GDP in Q4 2012 was due to the faster pace of the decline in investment that outweighed the slight growth in consumption and the positive contribution of net exports. The contraction in GDP was accordingly mitigated and was far less pronounced than in the rest of the Eurozone which, as a whole, retreated 0.6%. This is an advantage of the French economy’s inertia.
After a tough end to 2012, the outlook for 2013 is hardly promising. Confidence surveys remain bad. With respect to activity, January data covering industrial output and retail sales recorded a severe backlash, falling 1.2% and 0.8%, respectively, after their artificially good performance in December when they rose 0.9% and 0.2%. Industrial output, accordingly, posted a negative carry-over of 0.7% in Q1 while the same figure for real household consumption expenditures on goods is -0.6%. A renewed contraction in Q1 GDP therefore seems likely and we forecast a 0.1% decline.
BY Hélène BAUDCHON
To Read the Entire Report Please Click on the pdf File Below.