My Daily Column – Lower oil price: A really good news

Every morning I record a podcast in French (see here) on a specific topic. The text below is the translation of this morning podcast.

The drop in oil price will have a salutary effect on the economy of the Euro Area.
The lack of commitment between oil producers at the OPEC meeting in Vienna on Thursday the 27th implies a continuous slide in the oil price.

This situation reflects a very peculiar situation on the oil market which is in excess supply. Demand’s dynamics is limited because of the gloomy global growth momentum. At the same time, production is at a high level. Every producer tries to improve its revenues by increasing its own production or by maintaining it at a high level.
Continue reading

My Daily Column: Investment and the Juncker Plan: some doubts

Every morning I record a podcast in French (see here) on a specific topic. The text below is the translation of this morning podcast.

Economic growth in the Europe has a low profile since the first quarter of 2011. It’s necessary to find a way to create a breakage in order to converge to a higher trajectory.
Investment is probably the good tool for that. It can accelerate rapidly as it has been seen in the past and so can rapidly change the profile of the economy. Moreover it can incorporate innovations and technical progress in order to improve potential growth.
Continue reading

My Daily Column – US growth is accelerating

Every morning I record a podcast in French (see here) on a specific topic. The text below is the translation of this morning podcast.


US GDP growth has been revised on the upside for the third quarter
. In the first estimate it was 3.5% at annual rate. It is now 3.9% with the second estimate.
The acceleration came mainly from internal demand. Its contribution to the GDP quarterly growth is now 3.3% versus 2.8% for the first estimate. As government expenditures’ contribution was almost the same in the two estimates, the improvement was driven by the private demand (HH consumption, companies’ investment and residential investment). Its contribution to GDP quarterly growth was 2.5% versus 2% in the first estimate. Continue reading

Daily Column – IFO Rebound in November: is it sufficient?

Every morning I record a podcast in French (see here) on a specific topic. The text below is the translation of this morning podcast.

After the rebound of the ZEW index, the IFO synthetic index was up in November. Is it sufficient to sweep away all the uncertainties on the German short-term economic prospects? Certainly not
After 6 months of free fall, the two indices, ZEW and IFO, have a rebound and this one is not spectacular. For the IFO it just erases the drop seen in October. For the ZEW it has not this magnitude. Figures are still low in November Continue reading

Daily Column – Accommodative Monetary Policies

Every morning I record a podcast in French (see here) on a specific topic. The text below is the translation of this morning podcast.

Monetary policy management is now more complex than what we expected a few months ago. At this time, the focus was made on US monetary policy and the moment where the Fed would increase its interest rates. We had in mind that the end of asset purchases would be closely related to the rate hike.
The other central banks in developed countries were supposed to adjust their monetary strategy to the environment decided by the US central bank Continue reading

What can we Learn from the Week of the 17 November?

On Monday, I record a podcast in French (here) on macroeconomic news of the previous week and on macroeconomic news expected for the week to come.
The translation in English of the podcast can be found below

What can we learn this week?

Companies’ surveys have shown, on average, a lower momentum in November.
In the United States, the PMI/Markit survey still shows a robust growth profile but with a weaker trend than during last spring.
This can also be read in production indices. The manufacturing production index published by the Fed was in October growing at the moderate pace. On a 3 month change basis, it was up by 2% compared to +7.2 % last June (annual rate).
As the inflation rate for October was stable for the third month in a row at 1.7%, there are no immediate incentives for the Fed to change its mind on monetary policy. No pressures for a rapid hike in its interest rates. Continue reading

3 graphs on the Japanese recession

The Japanese economy is back into recession. After the deep drop of the second quarter due to the VAT rate hike on April the first, the negative momentum has not been reversed. (see chart 1).
GDP dropped by -1.6% at annual rate in the third quarter after -7.3% during the second quarter. Compared to Q3 2013 GDP is down by -1.1%. Carry over growth for 2014 is still positive but by a mere 0.2%.
It seems that Shinzo Abe has postponed the second VAT rate hike that was scheduled for October 2015. He is right as in a very weak global environment, the Japanese economy will have to find resources in itself to converge to a growth trajectory. A new negative shock is not necessary.
It will be complicated for Japan to escape to a long recession. From my point of view, we can expect a recession of several quarters. In 1997 after the VAT rate hike, the shock was milder than the current one but the recession lasted 5 quarters.
The very accommodative monetary policy can help to recover. Weaker yen and negative real interest rates will help.
In details (see 2nd graph), there was a small rebound in consumption during the third quarter (+1.5% annual rate) after -18.6% during Q2. Investment was down again in the third quarter: -2.2% after -16.6%. Due to a positive contribution from government expenditures, internal demand had a small positive contribution: +0.65% versus -14.7% in Q2. (see 3rd graph)
Net export has a positive contribution as exports regain a stronger momentum. But contribution from inventories was negative. Companies has accumulated inventories in Q2 but reverse the movement in Q3. That explains the fall into recession of the Japanese economy
Japan-2014-Q3-GDP-trendJapan-2014-q3-ContribJapan-2014-Q3-Int-Demand