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The French economy will remain virtually stagnant until the end of 2014 and start 2015 without momentum, according to the latest projections by the INSEE published on October 2, which erode the forecast of a 1% growth in the next year chosen by the government to build the draft budget law.
The gross domestic product of France to rise by 0.1% in the third and fourth quarters after stagnating in the first half, growth ressortant averaged 0.4% over the full year, as in 2012 and 2013, according to INSEE. At the end of 2014, which is the forecast by Insee, the carryover for 2015 would amount to 0.1% said Vladimir Passeron, head of market conditions.
The assumption of a GDP growth of 1% next year, chosen by the government for the development of the draft budget law was optimistic described by the High Council of Public Finance has estimated that it required a rapid and sustained pickup in activity that does not advertise the latest economic indicators.
relapse business climate
INSEE, which still anticipated in June GDP growth of 0.3% in the third and fourth quarter and 0.7% on average over the year, highlights the relapse of the business climate in all sectors in the course of the summer to explain the lowering of its forecast.
The near stagnation in activity until the end of the year, consistent with the profile of economic growth since the spring of 2011, would not halt the rise in unemployment, the rate would increase to 10.3% the end of the year (after 10.2% in the second quarter) and 9.9% in France (9.7%).
small increase in household consumption
Household consumption would grow little by the end of 2014, according to INSEE, which expects growth of 0.2% of their expenses in the third and fourth quarters, “linked to a power purchase income would accelerate moderately “(+ 0.8% over the full year after stagnating in 2013). A total household consumption to rise by only 0.1% over the full year.
Rising prices in the near-zero consumption in September amount to 0.4% yoy in December on the horizon, assuming a price of a barrel of oil steady at $ 97 and a rate of Euro exchange for $ 1.28. However the core inflation barely positive this summer, and would decline even almost zero at the end of the year.
The household saving rate is still to 15% at the end of the year against 14.7% in late 2013, their housing investment would continue to decline, albeit at a slower pace in the second half and would fall 7.4% over the full year, falling to its lowest level since 1998.
NO MARGIN INCREASE DESPITE CICE
The business investment spending would fall back again, hit by continued weak demand. They fall by 0.3% in the third quarter and 0.2% in the fourth, their withdrawal up to 0.6% for the full year. The margin businesses do not move forward in 2014, reaching 29.4% after 29.8% in 2013 and 30.5% in 2012, despite the favorable impact of CICE, also stresses the INSEE.
Export growth would be a bit stronger than the first half, thanks to the effects of the depreciation of the euro. But foreign demand remains sluggish, the institute expects the economic situation, which expects GDP growth in the euro zone 0.2% in the third and fourth quarters driven by Germany and Spain.
public consumption increases
In total, the contribution of foreign trade to growth will be flat in the second half and for the full year. Public consumption would increase for its 0.3% per quarter by the end of 2014, its growth has now averaged over the year on the same rate (1.8%) than in previous years (1.7 % in 2012 and 1.9% in 2013).
INSEE points out that this scenario is surrounded by uncertainties that relate in particular to the demand of companies in France and the euro area. “If the summer deterioration of the business climate is growing in the fall, their wait could weigh more on domestic demand,” writes INSEE citing uncertainties related to various geopolitical crises, particularly in Ukraine.
“However, if the recent depreciation of the euro continues, European companies could revise up their expectations of demand,” says the institute, including the head of department of environment reminded that a depreciation of 10% the euro translates into 0.5 percentage point of growth in addition to the one-year horizon. “The resolute attitude of monetary authorities to avoid any risk of deflation may also encourage companies to increase a little more their spending,” said INSEE also.
With Reuters
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