France Economy Probably Stalled in Q1 of 2013


The French economy has been barely growing since early 2011 and contracted 0.3 percent in Q4 of 2012. Indeed, tight fiscal consolidation policy in connection with rising unemployment are taking an heavy toll on domestic demand, one of the traditional motors of the French economy.

Indeed, in April, Consumer Confidence was reported at 84, the lowest level in 15 months, and in March retail sales decreased 0.7% yoy . Additionally, the job market shows no sign of improvement as unemployment rate is at its highest in 12 years and jobless claims have increased for 21 straight months, leaving the most people out of work since 1998. More importantly, deteriorating household consumption in conjunction with weak exports have been a drag on business confidence and investments. As a result, industrial production has been declining since December of 2011. On the positive side, the French President has pledged to shrink government spending by 60 billion euros over five years, cut in payroll taxes and ease labor regulation in a bid to improve competitiveness. 


In March, industrial production contracted for the 15th consecutive month. Moreover, in April, business confidence was reported at its lowest level since August of 2009, suggesting the industry sector rebound is still out of reach.
 
In the last quarter of 2012, French unemployment hit 10.6%, its highest level in more than a decade.
     

 


Nuno Fontes | nuno@tradingeconomics.com
5/7/2013 11:34:58 AM