Self-sustained recovery in the EurozoneConjoncture in France - June 2016
General outlook : Self-sustained recovery in the Eurozone
2016 started with a further acceleration in activity in the Eurozone (+0.6% after +0.4%). Gross domestic product increased more sharply than expected in France and Germany, while growth did not weaken either in Spain or Italy. The fundamentals driving this growth would now appear to be robust, as shown by the positive trend in the business climate. While exports drove growth in 2015, domestic demand is taking over in 2016 to keep growth stable at just above +1.5% on an annual basis. Eurozone growth should therefore hold up despite a less positive international environment. The slowdown in the US and UK economies is likely to be confirmed in 2016, all the more since uncertainties in the UK as to the prospects of a “Brexit” cause investors to adopt a wait-and-see attitude. The emerging economies should pick up modestly but world trade is expected to grow at a considerably slower pace than before the crisis. In France as in the Eurozone, the factors of resistance to this global context are the same as in 2015. Despite the recent rebound, the price per barrel of oil in mid-2016 is still at almost half its mid-2014 level. Its past decrease is helping to keep inflation at very low levels, thereby stimulating household purchasing power which is also being buoyed as the acceleration in activity works through into employment. Growth in household consumption is therefore likely to hold stable on average over the year. Businesses should continue to restore their financial situation, therefore improving the financing terms of productive investment: this latter is expected to be the main factor in the acceleration in activity in 2016. On average over the year, growth should therefore come to +1.6%, after +1.2% in 2015, representing its strongest rise since 2011. The only cloud on an otherwise clear horizon is foreign trade, which is likely to act as a drag on economic growth even more than last year. Accelerating activity and policies to reduce the cost of labour on lower wages are set to boost employment which should increase by 210,000 in 2016. This increase should allow a 0.4-point fall in the unemployment rate to 9.8% of the labour force by the end of the year.