The French Economy Suffers as Manufacturing Demand Shrinks
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Recent economic data emerging from France has placed further amounts of pressure on the currently stagnating economy. The country appears to be somewhat under-performing, especially in the realm of industrial production, generating concerns in government officials and financial experts alike. What did they expect when they voted in a devoted socialist?
Recent economic data emerging from France has placed further amounts of pressure on the currently stagnating economy. The country appears to be somewhat under-performing, especially in the realm of industrial production, generating concerns in government officials and financial experts alike. What did they expect when they voted in a devoted socialist?
The fresh figures show that industrial production fell by approximately 0.8% in October, in spite of economists’ expectations and forecasts for a 0.2% month-by-month gain. In 2014, the French economy teetered on the edge of a technical recession, following two consecutive quarters of negative growth. When you vote for someone who wants to attack employers, this is going to be the result.
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The Manufacturing Sector
As 2014 has come to an end, manufacturing sectors throughout France shrank even more than analysts had expected, providing further evidence that the second-largest economy in the region is struggling to hold on. A company called Markit Economics announced that the December manufacturing Purchasing Managers Index decreased from 48.4 to 47.9. The country clearly is below the 50-point mark dividing contraction and expansion.
Economists had actually forecast an increase for the manufacturing sector, to 48.6, as new businesses began to expand for the first time since August of 2014.
Measures to Revive Growth
Because France’s economy has been struggling to expand over the past three years, and the budget shortfall has continued to climb, Prime Minister Manuel Valls has released a month-by-month plan to revive growth. However, this plan came far too late for Fitch Ratings, which cut the country’s credit rating on December 12. Fitch Ratings announced that France lacked any material improvement in debt dynamics, and cited its slippage in regards to deficit targets.
Manufacturing and Services
Unfortunately, the services sector in France also experienced a small dip towards the end of 2014, dropping from 48.3 in October, to 47.9. The composite PMI also declined from 48.2 to 47.9, the lowest in nine months. A PMI reading of below fifty signals a contraction, and the French service sector had declined for three months in a row. Fortunately, however, Markit’s PMI for services indicated a significant rise in December, from 47.9 to 49.8, bringing services closer to expansion.
The manufacturing sector is the largest cause for concern amongst economists as output fell at a sharper rate than expected. According to Markit’s chief economist, it is possible that the end of 2014 coincided with an economic bottom. He suggested that the services index and the overall PMI reading could move above 50 in January.
