Friday, 20 July 2018

On the veracity of French data and the masculinity of footballers

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I might stand accused of being cynical but can anyone give me as much as a half-way convincing explanation of where France took its Q3 reported GDP growth from? 0.2% QoQ and 0.2% YoY? They’re having a laugh, not least of all in light of the downward revisions in the Q2 numbers.

Anthony Peters, SwissInvest Strategist

We were all suitably surprised three months ago when the forecast was already for negative growth but it turned to be flat which kept la Grande Nation out of pre-recessionary territory.

That 0.0% growth has now been revised to -0.1% but who cares about revisions? I don’t want to lightly lump INSEE into the same pot with the Greek statistical service but I’m afraid I don’t believe these figures.

If Germany struggles to find 0.2% growth, where is France going to take it from? I have looked into some of the detailed figures and I’m afraid I can’t make them stack up.

Most significantly, business investment numbers continue to look poor and even the pop in consumption which supposedly drove this unexpected rise in GDP cannot make the future look any rosier.

In a funny old way, the last thing France needed was a set of upward looking releases. Complacency is the mortal enemy of reform and that is something France needs by the skip load.

…the only way to gauge an economy is by getting out there and looking and talking to people.

I understand – rumour mill only – that some officials in Germany are already bemoaning the loss of their ally, France. President Hollande’s very personal socio-economic model has seemingly caused the tearing up the rulebook which has governed the Franco-German leadership of the European project for so long and, if my little spies are to be believed, even old cooperation standards at administrative grass-root level are under strain. However, glossy ideology doesn’t pay the bills.

INSEE reports that the business climate has fallen back a further two points during the July/October trimester to a three year low of 85.00. Remarkably, the building sector which should have nothing to shout about was above average at 90.00 but I suppose that it is hoping for stimulus cash to be floating its way.

Polls in the industrial environment are horrid with key indicators for output and orders weakening and prospects for exports also weakening. Overall, France is in a mess – no news in that one – so the +0.2% growth figure sticks out like a sore thumb and should almost certainly not be treated as a trend reversal but as an uncomfortable and lonely outlier and one which should have us practising our Gallic shrugs.

Overall, the Eurozone is in recession, even with France’s surprise up-turn. But within the other figures, there are some which have one scratching one’s head. I’ll buy the shocking Dutch numbers but if it reports YoY GDP contracting at 1.6%, how does Cyprus – which we all know to be back-to-the-wall in spades – to have its economy to be shrinking by “only” 2.2%?

Sod the statistics. The same as the military knows that you can’t win a war by air power alone and that one needs what they call “boots on the ground”, so the only way to gauge an economy is by getting out there and looking and talking to people. In his book “The Fist of God”, Fredrick Forsythe pitches human intelligence against spy satellites which can read a newspaper from 20 miles up. I rest my case.

Good money after bad

Elsewhere, the Battle for Greece continues with the world and his wife agreed that it needs to be rescued but few being able to agree on how to do it, how much it is allowed to cost and where the cut-off point will be, going forward.

By now pretty much everyone – except for the Muppet in Chief (Jean-Claude Juncker), maybe – has not worked out but as good as admitted that no matter how much money is put into the country, none of it will ever come back.

The chances of Greece ever being able to stand on its own two feet are growing ever more remote. Looking back two and a half years – the actual crisis broke surface in May 2010 – it is hard not to wonder whether the first cut might not have been the cheapest. Too late now.

Alas, it is that time of the week again and all that remains for me is to wish you and yours a happy and peaceful week-end. May you sit back and enjoy the sport – Wallabies at Twickenham with Guinness for real men, Stamford Bridge or Old Trafford for the rest after they’ve been to the grooming parlour to have the designer stubble trimmed and their nails done.

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