Today has brought some good news for the economy of France and let us start with a benefit for the future. From Reuters.
Airbus signed a deal on Monday to sell 300 aircraft to China Aviation Supplies Holding Company, including 290 A320 planes and 10 A350, the French presidency said in a statement.
So we learn that someone can benefit from a trade war as we also see Boeing’s current problem with the 737 max 8 no doubt also at play here. Airbus is a European consortium but is a major factor in the French economy and below is its description of its operations in France.
Overall, Airbus exports more than €26 billion of aeronautical and space products from France each year, while placing some €12.5 billion of orders with more than 10,000 French industrial partners annually.
The official measure released earlier told us this.
In March 2019, the business climate is slightly more favorable than in February. The composite indicator, compiled from the answers of business managers in the main sectors, has gained one point: it stands at 104, above its long-term mean (100).
If we look at the recent pattern we see a fall from 105 in November to 102 in December where it remained in January before rising to 103 in February and now 104 in March. So according to it growth is picking up. It has a long track record but is far from perfect as for example the recent peak was 112 in December 2017 but we then saw GDP growth of only 0.2% in the first quarter of 2018 as it recorded 110.
Continuing with its message today we are also told this about employment.
In March 2019, the employment climate has improved again a little, after a more marked increase in February: the associated composite indicator has gained one point and stands at 108, well above its long-term average.
This is being driven by the service sector.
Also things should be improving as we look ahead.
The turning point indicator for the French economy as a whole remains in the area indicating a favourable short-term economic outlook.
Although the reading has fallen from 0.7 in January to 0.5 in March.
We have been updated on this too with a nudge higher.It did not come with the fourth quarter number for Gross Domestic Product ( GDP) growth which was still 0.3% but the year to it was revised up to 1% from 0.9% and the average for 2018 is now 1.6% rather than 1.5%.
The economic growth has helped with the relative number for the national debt.
At the end of 2018, the Maastricht debt accounted for €2,315.3 bn, a €56.6 bn year-on-year growth after a €70.2 bn increase in 2017. Maastricht debt is the gross consolidated debt of the general government, measured at nominal value. It reached 98.4% of GDP at the end of 2018 as in 2017.
As you can see the debt has risen but the economic growth has kept the ratio the same. At the moment investors are sanguine about such debt levels with the ten-year yield a mere 0.37% and it has been falling since mid October last year when it was just above 0.9%. Partly that is to do with the ECB buying and now holding onto some 422 billion Euros of it plus mounting speculation it may find itself buying again.
Those who followed the way the European Commission dealt with Italy may have a wry smile at this.
In 2018, public deficit reached −€59.6 bn, accounting for −2.5% of GDP after −2,8% of GDP in 2017
With economic growth slowing and President Macron offering a fiscal bone or two to the Gilet Jaunes then 2019 looks like it will see a rise. As to the overall situation then France has a public sector which fits the description, hey big spender.
As a share of GDP, revenues decreased from 53.6% to 53.5%. Expenditure went down from 56.4% to 56.0%.
For comparison the UK national debt under the same criteria is 84% of GDP although our bond yield is higher with benchmark being 1%.
The Bank of France released its latest forecasts earlier this month and if we stay in the fiscal space makes a similar point to mine.
After a period of quasi-stability in 2018 at 2.6% of GDP, the government deficit is expected to climb temporarily above 3% of GDP in 2019, given the one-off effect related to the transformation of the Tax Credit for Competitiveness and Employment (CICE).
So the national debt will be under pressure this year and depending on economic growth the ratio could rise to above 100%. As to economic growth here is the detail.
French GDP should grow by around 1.4-1.5% per year between 2019 and 2021. This growth rate, which has been slightly revised since our December 2018 projections, should lead to a gradual fall in unemployment to 8% in 2021.
So the omission of the word up means the revision was downwards and if they are right then we also get a perspective on the QE era as GDP growth will have gone 2.3%,1.6% and then 1.4/1.5%. So looked at like that it was associated with a rise in GDP of 1%. Also we see the Bank of France settling on what is something of a central banking standard of 1.5% per annum being the “speed limit” for economic growth.
Right now they think this.
Based on the Banque de France’s business survey published on 11 March, we estimate GDP growth of 0.3% for the first quarter of 2019.
Which apparently allows them to do a little trolling of Germany.
The deceleration in world demand is expected to weigh on activity, even though France is slightly less exposed than some of its larger euro area partners, until mid-2019.
It only has one larger Euro area partner.
Also we get a perspective in that after a relatively good growth phase should the projections have an aim that is true unemployment will be double what it is in the UK already.
Added to this we have central banks who claim to have a green agenda but somehow also believe that growth can keep coming and is to some extent automatic.
Growth should then be sustained by an international environment that is becoming generally favourable once again and export market shares that are expected to stabilise.
Oh and these days central banks are what Arthur Daley of Minder would call a nice little earner.
Like each year, the bulk of the Banque de France’s profits were paid to the government and hence to the national community in the form of income tax and dividends, with EUR 5 billion due for 2017.
There is a fair bit to consider here. Firstly we have the issue of the private-sector or Markit PMI survey being not far off the polar opposite of the official one.
At the end of the first quarter, the French private
sector was unable to continue the recovery seen in
February, as both the manufacturing and service
sectors registered contractions in business activity.
If they surveyed a similar group that is quite a triumph! The French economy can “Go Your Own Way” as for example we saw it grow at a quarterly rate of 0.2% in the first half of 2018 and then 0.3% in the second. Only a minor difference but the opposite pattern to elsewhere.
Looking at the monetary data it does seem to be doing better than the overall Euro area. There was a sharp fall in M1 growth between November and December which poses a worry for now but then a recovery of much of it to 9.2% in January. So if this is sustained France looks like it might outperform the Euro area as 2018 progresses as it overall saw a fall in money supply growth. Or if the numbers turn out to work literally then a dip followed by a pick-up.