Saturday, August 23, 2003

French Economy in Recession

So let's start the day with the good news shall we. I am of course being ironic. The latest info on second quarter GDP growth in the French economy (released yesterday by Insee) shows a 0.3% contraction. The equity markets seem way out of line with a very flat looking economic horizon here in Europe, and we shouldn't be surprised to see a 'correction' at some stage.

The French economy suffered a sharper-than-expected fall in growth during the second quarter, casting a shadow over hopes of a recovery in the eurozone. French GDP fell 0.3 per cent in the period, according to figures released on Wednesday by Insee, the official statistics institute, which lowered its previous figure for first quarter growth from 0.3 per cent to 0.2 per cent. Equity markets have risen strongly in recent weeks on hopes that an accelerating US pick-up will drag the 12-eurozone nations out of the mire. "It shows we should not get carried away by market optimism," said Ken Wattret of BNP Paribas. "At the moment it is expectations that are leading the charge . . . there's not much improvement in hard data." Forward-looking surveys, such as Germany's ZEW index, which rose strongly this week, have pointed to a rebound in optimism and a gradual upturn by the year-end. But the weak data from France - Europe's second largest economy - highlight the lack of drive in the region's economy. They are likely to lead to a downward revision of preliminary GDP data which showed the eurozone stagnated in the second quarter as recession gripped Germany, Italy and the Netherlands. "Last week's snap estimate of flat eurozone growth is already looking optimistic," said Mark Cliffe of ING. Eurostat - the EU statistics agency - is now likely to cut its estimate of eurozone economic growth in the second quarter from zero to minus 0.1 per cent, according to Reuters.
Source: Financial Times

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