Research Dept. News
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Monthly Report, num 345 - April 2011
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European union - France
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The French economy speeds up in the first quarter
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New employment boosting measures in France to reduce a relatively high unemployment rate.
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Consumption livened up to some extent in February. Retail sales grew by 0.5% in real terms, seasonally adjusted, compared with the previous month. Of note is the 12.5% monthly rise in footwear and 4.5% in clothing, while passenger car registrations were up by 13.3% compared with February 2010. However, consumption will probably slow down in the next quarter, judging by the drop in consumer confidence in February for the third consecutive month. The unfavourable outlook for the labour market is weighing heavily on French people's spirits.
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In fact, in spite of registered unemployment falling by 0.7% in January compared with December 2010 and the unemployment rate falling slightly to 9.6%, this is a relatively high level and the bulk of the evidence available suggests that it will only fall very gradually. New measures were therefore presented to boost employment, totalling 500 billion euros, focusing on the young and the long-term unemployed and with an emphasis on training.
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The French government also wants to introduce provisions in the Constitution to ensure the public accounts are balanced.
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On the supply side, industrial production advanced in January compared with the previous month. The outlook is positive, partly due to demand from Germany. Services are also looking healthy. Quarter-on-quarter growth in GDP in the first quarter of 2011 was therefore able to go above the 0.4% recorded in the fourth quarter of 2010.
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However, the economic expansion will probably moderate over the next few quarters, as suggested by some leading indicators and due to the effect of a restrictive fiscal policy. In this respect, the government passed a bill to introduce provisions in the Constitution to ensure the public accounts are balanced, following in the footsteps of Germany and in line with the recent guidelines provided by the European Union regarding economic governance. As we already know, the public deficit must fall to 6% in 2011, 4.6% in 2012 and 3% in 2013. Because of all this, and taking rising oil prices into account, we have lowered our forecast for the annual rise in GDP by 2 tenths of a percentage point to 1.6%.
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