Market Mover - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 3: France GDP (% q/q) v. Industrial Production
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-2.5
GDP (% q/q)
IP (% 3m/3m, RHS)
02 03 04 05 06 07 08 09
Source: Reuters EcoWin Pro
Volume SA-/WDA Q4 (f) Q3 Q2 Q4 08
GDP % q/q 0.6 0.3 0.3 -1.5
GDP % y/y -0.2 -2.3 -2.8 -1.7
PCE % q/q 0.8 0.1 0.4 0.0
External contrib. (pt) -0.6 0.3 0.9 -0.6
Key Point:
We expect a strong rebound, driven by consumption
and inventories.
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BNP Paribas Forecast: Rebound
France: GDP (Q4 2009, First Estimate)
Release Date: Friday 12 February
Retail sales of manufactured goods rose 3.0% q/q in Q4,
boosted by car sales (ahead of the reduction of purchase
incentives); excluding autos, retail still printed a strong
1.5% q/q gain. This should obviously benefit GDP growth.
However, a large part of that increase will materialise in
imports (assuming December is unchanged m/m, imports
in Q4 will be up 6.1% q/q).
Another key issue, as in the US, is the behaviour of
inventories. In the past two quarters, inventory contraction
was equivalent to 2.5 percentage points of GDP. This pace
of contraction is clearly unsustainable. More and more
companies are now reporting that stocks are below normal
levels, and some indicated in the latest INSEE survey that
the lack of inventories may create production bottlenecks.
The jump in imports is surely also a sign that the pace of
inventory contraction has eased.
As a result, we forecast PCE and inventory change to be
the main contributors to GDP growth in Q4 and foreign
trade to be the main negative factor.
We forecast GDP growth of 0.6% q/q, the highest rate
since Q3 2007. That, combined with the base effect, should
allow the y/y rate of change to recover to close to zero.
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Chart 4: French Labour Market
GDP (% y/y)
Private Sector Employment (Non-farm Payrolls, % y/y)
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Source: Reuters EcoWin Pro
% Q4 (f) Q3 Q2 Q4 08
NF Payrolls (sa) q/q -0.2 -0.6 -0.6 -0.5
NF Payrolls y/y -2.4 -2.7 -2.4 -0.9
Monthly Wage nsa q/q 0.3 0.5 0.4 0.3
Monthly Wage y/y 2.0 2.0 2.2 3.0
Key Point:
The labour market is showing signs of stabilisation.
We expect fewer job losses in Q4 but a pick-up in
wages is only likely to occur in the course of 2010.
BNP Paribas Forecast: Stabilisation
France: NF Payrolls and Wages (Q4 2009)
Release Date: Friday 12 February
The adjustment of employment to the sharp economic
slowdown was more rapid than in prior recessions. Rather
than reflecting labour market reforms, this was primarily
due to the corporate sector adapting to existing regulation.
The share of temporary employees and the use of interim
staff have increased in recent years, allowing for a quick
bringing into line of manpower resources with corporate
needs. The increased flexibility of working hours as well as
the rising number of part-time workers has further
increased flexibility. The bottom line is that employment is
likely to stabilise rapidly once the economy shows clear
signs of recovery. Unemployment was still on the rise in
Q4, suggesting continued job losses during that quarter,
but this may soon end.
On the wage front, the rising unemployment rate, absence
of inflation and extremely low capacity utilisation rate all
point to ongoing wage moderation in Q4. The annual
increase in the average monthly wage has fallen a full
percentage point over the last three quarters to an
unsustainably low level of 2.0%. That is consistent with
general wage increases of no more than 0.5% and
individual pay hikes of 1.5%. However, it will be some time
before wages do pick up.
Market Economics 12 February 2010
Market Mover
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