Published in French on October the 26th – Data expected this week but already published are briefly discussed.
8 points to keep in mind this week to highlight the macroeconomic momentum
1 – The improvement of the French economy is the real good news The business climate index, published by INSEE the French Statistical Institute, is above its historical average for the first time since August 2011.
It shows how deep and persistent was the negative shock that has hit the French economy since this period. Looking at the different sectors, building construction is the only one being still on the weak side. Services, Industry and retail trade contribute positively to growth. For the French economy we also notice in the INSEE quarterly survey that expected demand is improving rapidly. Continue reading →
The downturnin the USindustrial sectoris confirmedmonth after month.September’s figuresdo not invalidatethe trend observedsince the beginningof the year. Thetensionindicator,productioncapacity utilizationrate,follows a downward trend sinceJanuary.Herefor an easier readingand for a rapid comparisonwiththe unemployment rateI putexcesscapacity(100–Utilization Rate). Since the early90sthe reversalof this indicatoris alittle ahead ofthelabor market. There may bestillfor a few monthsa divergentdynamics between the2.
Nonetheless past developmentssuggest thatlower tensionsonthe production sidepull, at the end of the day, theunemployment ratewith it.Theslowdownwould then berecordedand the Fedwould beeven morereluctant toget toughon monetarypolicy.
Ten macroeconomic points to keep in mind this week
1 – The IMF has revised on the downside its forecast. In 2015 the world GDP will grow by 3.1% after 3.4% in 2014. Expectations for 2016 are marginally higher at 3.6%.
The main reason is in emerging countries which suffer with low commodity prices and the persistent weaker dynamics seen in China. The other point of concern is associated with higher Fed’s rates in the US. We feel a worried environment at this meeting
2 – The signature of the Trans-Pacific Partnership (or TPP) between the USA and 11 Asian partners (without China) is important. It is supposed to boost trade between all these members but we don’t know exactly what will happen in the balance of strength in this new framework. The arbitrage in case of conflict will be done by the World Trade Organization but we know that the role of states and companies will be different. This could be directly seen on the labor market conditions. As negotiations have been secret we need more details to clearly see the global picture and we will see with the experience how this TPP will work. Continue reading →