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Tuesday, December 10, 2013 1:39 PM


French Industrial Output Drops Unexpectedly; France Finance Minister in Complete Denial; Expect the Unexpected


I am in a near-constant state of amusement regarding what economists and analysts expect vs. what happens. A perfect example came up today.

MarketWatch reports French Industrial Output Drops Unexpectedly.

French industrial output dropped unexpectedly in October for the second month in a row, data from national statistics bureau Insee showed Tuesday, providing a further indication of a weak start to the final quarter of 2013 in the euro zone.

Industrial production in the currency bloc's second largest economy fell 0.3% in October from September, when it also fell 0.3%, Insee said. Analysts polled by Dow Jones Newswires had expected a 0.2% rise in October.

The October decline confirms a steady shrinking of output in industry. Over the three months through October, industrial production was 0.6% below the previous three months, Insee said.

The disappointment comes after separate data showed Monday that German industrial production dropped 1.2% in October from the previous month.

Why Was This Unexpected?

This decline should have been completely expected. I can give you three reasons.

  1. On December 2, the Markit France Manufacturing PMI final data showed "France PMI sinks to five month low as output and new orders fall at sharper rates".
  2. On December 4, the Markit France Services PMI final data showed "French service sector slips back into contraction in November".
  3. On December 4, the Markit Eurozone Composite PMI final data showed "Eurozone growth slows further as France and Italy suffer renewed contractions".

If you are looking for a 4th bonus reason, please pencil in "Francois Hollande" and all the socialist ministers in his government.

From the third Markit link above ...
Sector Output Growth ( Nov. )

Germany   55.4    29-month high
Ireland       55.4      5-month low
Spain         50.8      3-month high
Italy           48.8      5-month low
France       48.0      5-month low

Eurozone employment fell again in November, extending the current unbroken sequence of decline to 23 months. France, Italy and Spain all reported job losses during the latest survey month.
Chris Williamson, Chief Economist at Markit said: "declines in the PMIs for Italy and France raise the prospect of these countries’ economies contracting again in the fourth quarter, meaning Italy’s recession will have extended into a staggering tenth successive quarter and France will have slid back into a new recession.

Amusingly, analysts polled by Dow Jones Newswires had expected a 0.2% rise in industrial production.

France Finance Minister in Complete Denial

Those of you seeking still more amusement can find it in one of the usual places: statements made by French politicians.

For example (and also from today), the Financial Times reports Pierre Moscovici, France Finance Minister Says Economy has ‘Truly Emerged from Recession’
“France has truly emerged from recession,” Moscovici insists. “Of course, I would like to see the growth rate increase, but I wish we could stop this attitude of systematic doubt about the French economy.”

This week the Bank of France upped its forecast for fourth-quarter growth to 0.5 per cent. The big international economic institutions, including the European Commission, broadly agree with the government’s forecasts of about 1 per cent growth next year, followed by 1.7 per cent in 2015.

“It’s not wishful thinking. I base what I am saying on reality,” says Mr Moscovici.

[In regards to EU deficit limit of 3 per cent of GDP, the target pushed back to back to 2015] ... That will be met, Mr Moscovici assures. “I’m not just confident, I’m committed. We are on course to hit the target and there is no reason to doubt that.”

From 2015, 100 per cent of the deficit reduction effort will come from public spending cuts, he says. But he offers no apologies for the government’s initial reliance on tax increases, despite the recent protests.
Anyone Believe Moscovici?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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