A lower momentum for the Euro Area during the second quarter

GDP growth for the Euro Area was confirmed at 0.3% (flat) for the second quarter of this year (2.2% at annual rate).
The table below shows growth figures for different countries of the Euro Area.
In the largest Eurozone countries there is a slowdown during the second quarter. This is the case for Germany (from 2.9% to 1.7%), for France (+2.7% to -0.2%) for Spain (from 3.1% to 2.8%) and for Italy (from 1.1% to 0%) Growth is stronger in other countries.
Carry over for 2016 at the end of the second quarter is 1.3% for the Euro Area but 1.5% for Germany and 2.6% for Spain; but just 1.1% for France and 0.6%% in Italy. For other countries it is circa 1% except for Greece where it is still negative. Continue reading

Benchmarks after a vacation period

After a vacation period we all need to look at economic indicators to refresh our perception of the economic outlook. I propose a series of graphs with rapid comments.

Point #1Growth momentum was low in France and in the US during the second quarter.
In France, GDP was marginally down during the second quarter (-0.04% flat and -0.2% at annual rate). In the US, it was up by only 0.3% (flat) (1.2% at annual rate).
For France, this sudden stop is linked to private demand. Its contribution during the first quarter was at 3.6% at annual rate. It was negative at -0.1% during spring. Households’ expenditures slumped with a contribution that was null in Q2 after +2.5% during the first three months of 2016. Corporate investment has had a negative contribution at -0.1% after +1.1% during the first quarter.
The government forecast for 2016 is at 1.5%. It is now an ambitious target as it will be necessary to have a growth number at 0.55% (2.2% at annual rate) during the third and the fourth quarters. We don’t see where this spike would come from. It can work during one quarter, as it was the case during the first quarter of this year, but we cannot expect, for the French economy, two consecutive quarters above its potential growth trend Continue reading

Growth momentum falters in the Euro Area during the second quarter

The GDP growth number for the Euro Area was halved in the second quarter when compared to the first. During the first three months of the year, GDP was up by 2.2% at annual rate. During spring it was up by a mere 1.2%. For France, GDP growth went from +2.7% in the first quarter to -0.2% in the second. In Spain, growth momentum is still buoyant at 2.8% after 3.1% during the first three months of the year.
The carry over for 2016 at the end of the second quarter is 1.3% for the Eurozone, 1.1% for France and 2.6% for Spain. Continue reading

Strong start for the Euro Area in 2016

The first quarter of 2016 shows a strong acceleration in the economic activity of the Euro Area. Its growth was 2.2% at annual rate after 1.4% during the last three months of 2015. During the same period, GDP was up by 2.2% in France and 3.2% in Spain (we do not have more details).
The carry over growth for 2016 at the end of the first quarter is 1% for the Euro Area and France and 2% in Spain. This should be consistent with a 1.5%+ growth in the Eurozone and France and to circa 3% in Spain.
That’s a real improvement because GDP growth was almost 0% on average in the Euro Area from 2011 to 2014. There is a real change in its economic profile (see graphs below). Now, the level of the GDP is above its pre-crisis peak. It has taken almost 8 years for that. It’s too long and has persistent effects on productivity and on potential growth. Continue reading

My Macroeconomic column in 13 points (November the 2nd)

13 points this week to follow the macroeconomic momentum.

1 – The Fed is back in the game after its last week meeting (27/28 October). It hasn’t changed the stance of its monetary policy but it has deeply changed its press release. Headwinds coming from the external environment of the US economy were the main point to notice in September. The message from the Fed was that the probability of a Fed’s lift-off this year was low. This point has been erased in the October’s press release. Moreover, the Fed has mentioned explicitly a potential change at its next meeting (15/16 December).
Can we expect a lift-off in December? I don’t think so. The main reason for a change would come from the US central bank commitment to hike its interest rates in 2015. But as always the decision will be data dependent. The current economic situation will not create tensions that could push the Fed to change its strategy very rapidly. Recent data on the ISM and on retail sales have shown weakness that cannot be a support for a change.
Janet Yellen will testify in the Congress at the beginning of December (2 and 3). It could be a source of information on the Fed’s strategy Continue reading

Landmarks on Euro area growth in the first quarter

Growth figures in the Euro Area have been pretty good during the first quarter. The trend has dramatically accelerated in Spain, France is out of a long period of very low momentum and Italy is out of its recession.

Nevertheless, even with these good news, it is too early to be sure that the long stagnation that has characterized the Euro Area since the first quarter of 2011 is over. Austerity policies that were put in place at this moment have provoked a long recession in the Euro Area. The exit from this episode may start in 2015 with the new ECB monetary policy that focus on demand. 4 years to exit from the negative impact of these austerity policies that imagined that reduction in demand could imply a strong growth momentum (sic)
The current economic policy put demand at the front place to try to change the business cycle profile. I think that this is the best recipe to converge to a more virtuous business cycle.

This post wants to show the economic activity profile in the Euro Area and its main countries at the end of the first quarter. I do not give details of on composition of growth because usually only the GDP number has been published.

GDP Quarterly change
This graph shows the GDP quarterly change at annual rate. The red bar for the first quarter of 2015 shows strong performance in Spain, France and Italy. The German number is below expectations. Continue reading

Four Graphs on the Euro Area Growth Momentum

Euro Area GDP was almost stable during the second quarter (+0.2% at annual rate) after a slight increase of 0.8% during the first three months of this year. Compared to the second quarter of 2013, GDP is up by 0.7%. Carry-over growth for 2014 is 0.6% at mid-year (Carry-over growth at the end of the second quarter is the average annual growth if GDP level remains at Q2 level in the third and the fourth quarters. It’s a useful approximation)

The first chart shows GDP level at constant price. The red line is the trend calculated from 2000 to the first quarter of 2008 and prolonged until the second quarter of 2014. The gap between the observed GDP and the trend is -12% at the end of the first half of 2014. This is huge and we do not see any convergence between the two lines. It is more a divergence than a convergence. The line in blue is another trend that shows the momentum of the recovery in 2009 and 2010 and the break after the first three months of 2011. There is gain a divergence here. Since the first quarter of 2011, GDP is down by -0.36% (-0.1% at annual rate). The current recovery seen since the first quarter of 2013 is following a mild dynamics. From that date, average growth is 0.8% at annual rate. It is still far from the 1.9% which was the trend growth rate seen before the crisis. Continue reading