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Our review of current research suggests that there are reasons to believe that the stall in Q1 real GDP may not have been as dramatic as previously thought. Output growth, as measured by the income-side of the national accounts, has been tracking at a stronger pace than GDP and issues of residual seasonality have depressed Q1 GDP growth measures. We believe the balance of evidence supports the contention that Q1 seasonally adjusted real GDP growth rates are regularly understated by around 1½ percentage points.
The French pork industry can be summed up in a few key figures: 5,000 specialist producers deliver most of the 23.7 million pigs raised to some 15 abattoir/processors, which sell the bulk of the various cuts produced to half a dozen purchasing hubs and just over 200 meat curing companies. The remaining 30% (by volume) is exported.
Judged by its immediate objectives, ie, a drop in sovereign interest rates and the risk premiums of so-called peripheral countries, the monetary policy of the ECB is a success. In this connection, does the manifest success already achieved go beyond the originally hoped-for results? Historically ultra-low (if not almost zero) nominal interest rates, even on very long maturities, and, even more to the point, negative interest rates, are raising thorny economic issues – to put it mildly.
The current environment is favourable to a quickening in the pace of French growth. This is, in fact, what has been forecast for Q1, with a sustained increase in real GDP. Yet when one analyses the composition of growth over the recent period, one cannot but feel disquiet about the French economy. The low level of investment, in terms of both quantity and quality, is a real problem in these post-crisis times. Our 2015-2016 scenario is based on this two-sided picture.
Think of South East Asia and you immediately think sustained growth rates (often in excess of 5%) and see one of the world's most dynamic regions. Things should be hardly different in 2015, with the sole exception of Thailand, which is struggling to recover from last year's political upheavals. The news is not all good, however. There are areas of weakness, either common to all economies or specific to each.
The correction on the French housing market continued through 2014. It was a measured correction in the pre-owned sector, and more pronounced in new-build. In 2015-2016, the factors operating will be more or less the same, with two possible differences in that mortgage lending rates could stop falling and stabilise, while the support measures for new-build housing could drive a slight recovery in the sector. Volumes look set to ease back in the pre-owned sector, and prices are forecast to fall by 2.5% per year, while developer new-build sales could rebound by 5% a year.
Edition April 29, 2015
Eurozone: flattening of the yield curve
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