Tag Archives: economy

The French Consumer Is Alive And Well

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Some good news on the economic front to counter all that bad news on the social one. The French economy grew at an annualised rate of 2.8% in the third quarter of 2005 (or by 0.7% over the prebious quarter). Driving this growth: strong spending by French consumers. At this rate the French economy will be growing at a faster rate than the UK one in 2005.

France’s economy expanded at the fastest pace in more than a year in the third quarter, suggesting European growth is accelerating and providing central bankers leeway to raise interest rates. Gross domestic product increased 0.7 percent from the second quarter, when it rose 0.1 percent, the government said today in Paris.

In the euro region, where France accounts for about one- fifth of the economy, growth probably accelerated to about 0.4 percent in the third quarter from 0.3 percent the previous three months, the European Commission said Oct. 13. This quarter, the economy may expand 0.6 percent, it said. French consumers stepped up spending as oil prices retreated from a record and government-subsidized hiring pushed down unemployment from a 5 1/2 year high.

Serbia: A glimmer of light

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Things are looking up a bit for Serbia’s economy.

The 1990s were a lost decade for Serbia. GDP declined sharply in the first half of the decade. A modest recovery in 1995-8 was wiped out by the NATO bombing. Per capita income in 2000 was just about where it had been in 1989… but the average person was much worse off, because income distribution had changed drastically, with a small caste of the rich and well connected now owning most of the country’s wealth.

The fall of Milosevic in October 2000 brought in a new government, but the economy was very slow to respond. GDP grew by only about 3.5% per year between 2001 and 2004, foreign investment was slow to show interest, and the income distribution stayed as bad as ever. I lived in Serbia during those years, and the general impression was one of dashed hopes. The assassination of Prime Minister Djindjic in March 2003 didn’t help matters.
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UK Jobless Upward Trend Continues

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U.K. jobless claims rose for an eighth consecutive month in September, extending the longest period of increases in almost 13 years, “as growth in Europe’s second- biggest economy slows”. This adds just a little more evidence to the fact that all is not necessarily currently all for the best in the land of John Stuart Mill. However as NTC research point out, not all is totally bad either:

Meanwhile, annual average earnings growth held steady at 4.2 percent in the three months to August, signalling that higher inflation is still not feeding through to wages.

So earnings continue upwards at a healthy clip, but not above trend. No evidence of ‘secondary effects’ here then. Which makes you wonder why the normally reasonable Mervyn King is currently being so evidently unreasonable. You can find my explanation for this here (and in the comments).

Mervyn King on Tuesday night signalled he was not convinced of the case for lower interest rates and could see many reasons why the rise in oil prices might increase inflationary pressure.
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Another Grand Coaltion: The Sun of Jamaica.

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Over on Crooked Timber, Henry Farrell – I think somewhat accidently, because I get the impression he believes Germans do *NOT* want to change their distorted labour incentive and tax systems – writes about the fundamental reason for the result of last Sunday’s election.
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The Italian Government Has A New Crisis

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Germany isn’t the only EU country where serious ongoing economic problems are leading to political gridlock. Italy’s situation is no better, and arguably worse. This ‘worse’ aspect was pushed into the headlines yesterday by the resignation of Economy Minister Domenico Siniscalco. This is sending shock waves throughout the entire Italian political system. It still isn’t clear at the time of writing whether the Berlusconi government can survive, especially given the gravity of the underlying problem which is the need to make severe budget cuts when Italy is in a prolonged recession and elections loom sometime next spring.

Essentially Siniscalco quit because of continuing government infighting over the 2006 budget and over the administration�s failure to force the resignation of Bank of Italy Governor Antonio Fazio following the scandal produced by accusations that he showed bias against Dutch bank ABN AMRO during a takeover battle for the Italian Banca Antonveneta SpA.
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Why Finland?

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I just put up a post on the economic situation of Finland. Now I am putting another. Why the sudden interest? What is there about the Finnish economy which could be of interest to more people than the five million or so who actually live there?
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Optimism On The German Economy

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Both New Economist and MacroBlog seem very upbeat about the prospects for the German economy. Macroblog cites Bloomberg and says “Things are definitely looking up“. New Economist is rather more guarded, pointing to the IMF forecast, and the recent Federal Statistics Office announcement that second quarter growth came in at 0%. But New Economist find faith in an (old) Economist view that things are getting better in Germany’s surprising economy (ask Doug on the main page about the surprising bit 🙂 ). As New Economist says “Of course the Economist can get it wrong, but in thbis case maybe they’re onto something”, while as Edward replies “of course the IMF can get it wrong, but in this case maybe they’re onto something”

The Financial Times definitely comes down on the side of the optimism camp, but in their case with significant prudence:

However, fears Germany?s election system might result in a fractious ?grand coalition? between the CDU and Social Democrats may have damped expectations more recently and economists remain cautious about the strength of any German upswing. Holger Schmieding, economist at Bank of America, warned that expectations were fickle and that ?the economic upswings heralded by major surges in the ZEW in mid-2002 and early 2004 both turned out to be disappointingly shallow and short-lived?.

As for me, well, for my part
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Oooops It Isn’t Baaack….

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Morgan Stanley team members Steven Jen and Eric Chaney (joined by Takehiro Sato and David Miles) debate today the interesting question of whether the eurozone economies have entered a liquidity trap (LT). Those who have no idea what one of these would look like could do worse than read Paul Krugman’s classic article on the topic: It’s baaack! Japan’s Slump and the Return of the Liquidity Trap (pdf).

So what is all the fuss about?
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Eurozone Outlook

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There is a pretty mixed bag of numbers coming in at the moment. The German economy shows some signs of a recovery of activity (here), as is the French one (here). It is important to understand however that trend growth in Germany is now extremely low, and the economy is very export dependent. The underlying performance of the Frech economy is essentially much better. However, the sick man of Europe continues (and will continue) to be Italy (here)

Levels of business activity in the Italian services economy continued to fall in June. However, rising from 47.3 in May to 48.9, the seasonally adjusted NTC Research/ADACI Business Activity Index indicated that the rate of contraction had eased and was only marginal.

A month-on-month decline in new business to Italian service providers was recorded for the third successive month. Furthermore, the rate of decline quickened again and was the sharpest in the survey history. Panel companies reported that demand for their services had continued to suffer as a depressed domestic economy led to subdued client spending.

Service providers reported that diminishing levels of new business had freed up capacity, leading to the sharpest reduction in backlogs of outstanding work in the seven-and-a-half years that data have been collected.

Employment levels in the Italian service sector fell for the fourth straight month in June. The rate of job shedding was again only marginal, although slightly sharper than in May.
Source NTCResearch