Read news from:
Austria
SHARE
COPY LINK

ECONOMY

France given boost as economy rebounds after weak start to the year

France's economy expanded 0.4 percent in the third quarter thanks to higher consumer spending and manufacturing, providing welcome relief for the government after a weaker-than-expected start to the year.

Published: 30 October 2018 17:39 CET
France given boost as economy rebounds after weak start to the year
Business district La Defense in Paris. Photo: AFP
Data from the statistics agency INSEE showed the French economy growing at twice the pace recorded in the first two quarters of 2018.
   
President Emmanuel Macron has enacted a series of pro-business economic reforms since coming to power in May 2017, but is struggling to convince voters that the medicine is working due to sluggish growth and still high unemployment.
   
“The business climate was excellent after the election of Emmanuel Macron. 
 
Today it is getting worse,” said economist Alexandre Mirlicourtois at the Xerfi economic research consultancy. 
   
Mirlicourtois, like most economists, sees the outlook as uncertain due to factors beyond the French government's control such as rising oil prices, uncertainties over global trade and other geopolitical risks.
 
French economy: Growth slips despite Macron's pro-business push
Photo:Depositphotos
   
Macron is under mounting pressure domestically to show that changes to labour law and tax cuts for companies and high earners, as well as other 
measures designed to improve France's business climate, will produce more jobs and wealth. 
 
Unemployment figures published last week showed the number of jobseekers claiming benefits jump in the third quarter by 16,400 to 3.72 million, the second consecutive quarterly rise. 
   
INSEE forecasts that the unemployment rate will fall by 0.1 percent in the third and fourth quarters to reach 8.9 percent at the end of the year.
   
This compares with an unemployment rate of 9.4 percent when Macron came to power.
   
Philippe Waechter, an economist at Ostrum Asset Management, said he believed French growth in 2018 would fail to match the level of 2017 when it hit 2.2 percent.
   
“The economy lacks sources of impulsion and indicators suggest month after month that 2017 was exceptional,” he said.
   
The French central bank and Organisation for Economic Co-operation and Development (OECD) have forecast growth for the year of 1.6 percent, while the government is banking on 1.7 percent.
   
There were bright spots in the third quarter, however.
 
Consumer spending, set to be boosted further by tax cuts passed in the new budget, rose 0.5 percent, after a fall of 0.1 percent in the second quarter.
   
The manufacturing sector recorded growth of 0.8 percent, while corporate investment — an important driver of future growth and a measure of confidence in the economy — rose 0.8 percent after expanding by 0.9 percent in the second quarter.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

SHOW COMMENTS