France is Stuck in the Mud
by Rebecca Wilder
According to the Eurostat flash estimate, Euro area GDP fell by 0.2% in both the euro area and the EU27 in the second quarter of 2012. In the first quarter of 2012, growth rates were 0.0% in both zones. On balance, the Euro area is very likely in recession despite the fact that the region successfully skirted the “two negative quarters of growth” rule of recession dating having stagnated in Q1 2012 following a 0.3% contraction in Q4 2011.
The underlying country GDP estimates for Q2, released by the various statistical agencies, do illustrate a deep divide among the growth prospects across the 17-country Euro area in Q2 2012. Here is a select list of reported growth results (all for Q2 2012 in % Q/Q not annualized):
Germany, +0.3%
France , +0.0%
Netherlands, +0.2%
Spain, -0.4%
Italy, -0.7%
Portugal, -1.2%
The French flash release, in particular, caught my eye: “No growth for the third consecutive quarter” is what INSEE titled its publication. The French economy has effectively stalled. Using Eurostat data, the economy has grown just 0.09% (the unrevised numbers) since July 2011. And since Q2 2011, the economy grew just 0.3%. In all, the economy is not technically in recession but it certainly isn’t expanding. To me, the question is, will it go up or down from here?
Compared to history, the current expansion in France has been nothing short of pathetic. Stuck in the mud.
Note: In the chart above, the French dating of business cycles is taken from the OECD, which is available through the FRED database. In the legend, those dates with a (2) indicate short recoveries with an ensuing recession (1 recession and 1 expansion with the same number of quarters as the 2009-2012 expansion). Therefore, the graphs are truncated when the next recession started over the period.
Rebecca Wilder
A trivial and temporary blip in France. After all, they’ve just raised the top tax rate to 75% and as Mike Kimmel keeps telling us, that always produces more growth, doesn’t it?
OOOOOOOOOOO, I knew that someone would look at this growth rate and uses it to comment on the recent changes France has made such as the increased tax rate.
This comment has been removed by the author.
Sorry about that – hit delete on accident.
Hollande took the Presidency in May 2012 and then promised to raise taxes in the following months (July, I think). I find it much more plausible that the economy is stalling due to the fiscal austerity implemented by the Sarkozy administration (as you can see, the recovery stalled in the middle of 2011).
I don’t know how France can avoid recession, what with the deficit reduction target Hollande has set. Of course, increasing taxation probably has a lower (de) multiplier than slashing government. (What do you think, Rebecca?)
I don’t know how Hollande managed to get so little from Merkel. Maybe he’s waiting for the inevitable Euroland recession, which could lead to a Socialist victory in upcoming German elections, and a real growth plan at the European level.
Maybe we’ll have a nice surprise, like a trillion Chinese starting to use L’Oreal hair spray.
Oh wait. I almost forgot. I think 2011 is turning out to be a great vintage year for Bordeaux reds. See
frauncher.blogspot.com
Worstall
one of the problems with the Right is they never quite get their facts straight.
Kimel never recommended a 75% rate. He did suggest a higher rate than what we have here today would not reduce growth. but see…
Worstall
one of the problems with the Right is they never quite get their facts straight.
Kimel never recommended a 75% rate. He did suggest a higher rate than what we have here today would not reduce growth. but see…
here i go again
is there any reason to suppose that “growth” is the optimal solution to what ails the economies of the world?
how about “better” rather than “bigger”?
Anon-here you go again
Agreed, but a bit of infrastructure could help on both sides of the Atlantic – now as well as later.
Anon – I assume Coberly. I agree we measure progress by GDP, but I think it is a lame indicator. Unemployment, is a more important measure. After all GDP will go up if you increase government spending, because its part of the formula. But if GDP is going up but employment is not going down, then IMO no progress has been made.
Unfortunately, we are ruled by rubes from the Democrat and Republican parties.
Farrar and McWop
i have nothing against infrastructure, and nothing against employment
in fact i think one of the jobs of government is to evaluate what infrastructure will make things better, and what strategies will lead to better jobs… and more people working.
what i object to is “growth” as a kind of mindless measure of all things.
coberly is still anonymous by order of Google