You will find enclosed my Economic Outlook – November 2015
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 Chinese external trade surplus is almost at its highest in August 2015. It is close to USD 60bn. Cumulated on twelve months, the surplus is at its highest ever. That’s what we see on the graph.
Comparing exports and imports’ profiles allows a better understanding of the trade surplus and of the impact China has on the world trade momentum. Continue reading
The point I developed was the following
World trade momentum is atypical and low, lower than what it used to be in the past.
The main reason is the absence of growth drivers that could pull up the world economy. In the past the United States did the job. More recently, at the beginning of the 2000’s, China was the main source of world growth improvement. They were able to push up the world economy in order to converge to a higher trajectory.
Currently neither the US nor China have the possibility to play this role. Europe which is at the start of a moderate recovery is not able to create such impetus.
In other words, even if trade level is still very high, there are no sources that are able to improve world growth trade dynamics. Continue reading
I have merge the two posts on world trade in the following document
World Trade – PW – August 2015
In a recent post, I was worried by the weak trend seen on world trade since 2011 and on its recent decline. It is down by 8% (annual rate) between December 2014 and May 2015.
The absence of a rebound reflects a series of negative shocks on the global economy that have limited the possibility of a global recovery.
Before trying to understand these issues, it’s interesting to look at the graph of world trade; not in yearly change but in level. We can see that since the beginning of 2002 there were three periods
• From 2002 to 2008 the momentum of trade was high consistent with the 7% growth seen in the first chart of my previous post. I started in 2002 as Chine became membership of the World Trade Organization in December 2001.
• The second phase is the break and the recovery in 2008 and 2009. The catch-up was rapid but not complete: the index has not converged to its pre-crisis trend. We can do that formally but we see on the graph that world trade momentum remains far from the 2002-2008 trend.
• After summer 2011, the dynamics is low and the slope is weak, much weaker than what was seen before the crisis. Since the beginning of 2015, world trade momentum has plunged. Continue reading
The current momentum of the world trade, in volume, is worrying me. Comparing May 2015 to May 2014 shows that world trade is growing at a mere O.4%.
For the whole first quarter, compared to the last three months of 2014, world trade has shrunken by -5.1%. For the second quarter the carry over growth at the end of May is negative at -4.25%. This is the second consecutive quarter of decline and that where the problem is.
This weak dynamics in the world trade is not new. Since the end of summer 2011 its yearly growth rate is below the blue band on the graph. This blue band is the average growth from 1992 to 2007 +/- a standard deviation. Before after a shock that pulled it down (red circles on the graph), the world trade recovered rapidly with usually an overshoot before converging to the blue band.
This is no longer the case. After the rapid recovery seen in 2009/2010, the world trade momentum has slowed dramatically, staying below the blue band. It’s a very specific period. We cannot exclude that this could be a by-product of the austerity policies that have been put in place in Europe and that has led to a long recession from mid-2011 to the end of 2013. Continue reading