Today, France stands at one of its lowest confidence rate since a decade. On a global scale, world trade contracted in 2007 with only 5.5% growth compared to 8.5% in 2006. The sub primes crisis is directly hitting the global financial markets and disturbing the world economy. If we have a glance at consumer prices and oil and raw materials prices, concerns are high. In this gloomy atmosphere, our report aims at analyzing the different forecasts for 2008 French Economy.
We will explain the various impacts of the international context on the French Economy. We will also lay the stress on the different mechanisms that affects consumption, investment and more generally the GDP growth. Our dossier puts mainly the emphasis on data from INSEE and BNP. Finally, we think that institutes may have had some hardships to evaluate the weight of financial crisis and incentive French Government policies of last 2007 in the mid- term.
[...] Household's confidence evolution Source: INSEE (since acity roblems Source: INSEE The first results of 2008 confirm the forecasts made by the BNP and INSEE. In the early 2008 the capacity utilization rate seems to be close to However, the first figures for 2008, ( 86.1 in January and 85.2 in April) lead to anticipate a possible decline in capacity utilization rate due mainly to moderate demand and lighter investment. Prices, wage rate, interest rate interest rate) Inflation rate (April 2008) French Consumer prices by sector (INSEE, April 2008) mars fév. [...]
[...] It is currently trying to reduce the inflation whereas overseas, the FED aims at reactivating the American economy Alternative forecast: BNP We suggest you a ranking of the BNP and INSEE according to our analysis and our perception of evolutions BNP Forecasts INSEE Forecasts Unemployment rate + Rate of capacity + + utilisation Inflation rate + Wage growth ~ ~ Source: INSEE According to the five elements you have studies, we have a preference for the BNP forecasts which seem to us to take into account more the new emerging context except on the interest rate. [...]
[...] But the recession in the USA might have a negative influence on the economy of the Euro zone. The GDP growth in Germany is quite low and the GDP of Italy is expected to be wimpy. However, Consumption is maintained by some improvement in the labor market. The INSEE expect the global demand concerning French products to rise at a slower rate than in 2007. By contrast, the emerging countries are still enjoying a strong growth. They follow the Chinese economic expansion and are helped by higher commodity price. [...]
[...] The real economy Contributions to real GDP growth components of in component * INSEE change in INSEE demand weight of component * component weight of component Consumption Consumption (FBCF) Demand Source INSEE components of demand component * weight of component Private Consumption Private consumption clearly accounts for a huge part of French 2007 GDP (nearly two thirds). This means that GDP has been pulled up by households' consumption. In spite of predicted fall of the purchase power, INSEE forecasts a stable evolution of the private consumption of the 2008 GDP (still two thirds). [...]
[...] BNP takes really into consideration the international context (particularly the sub-prime crisis and the growing competition between developed and developing countries) whereas INSEE is more focusing on economic mechanisms inside France without giving a huge importance to soaring oil and raw materials prices and appreciation of Euro. INSEE forecasts are, in a sense, closer from what French government said when they announced their budget. France is always criticized because it gives the feeling living on its own. In reality, France is affected in the same way by globalization and international context than other countries. [...]
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