France

Eurozone inflation rates: Easter is casting shadows

After the EMU inflation rate (Harmonised Index of Consumer Prices [HICP]) rose to 2.0% in February, it fell relatively substantially according to flash estimates back down to 1.5% in March. Energy prices once again played a significant role in this development. They have risen by 7.3% year on year. In February, the price-increase rate here was still 9.3%. The inflating effect of the oil price continues to wane. The price of food also rose less strongly than previously. The Easter holiday must also be factored in more strongly in March: this year, Easter falls in April and not in March as was the case in 2016. This has led to the situation whereby, year on year, prices for services have declined pretty clearly. They fell from 1.3% last year to 1.0% this year. However, this clear change in services is not uncommon in years when Easter switches months. On account…

France: How could Le Pen win?

Concern that the right-wing populist Marine Le Pen could become the next French head of state is dogging the markets: since the beginning of the year risk-aversion has increased significantly. Although the risk premiums of 10-year French government bonds over Bunds have come down visibly again in the past few weeks, spreads are still at a clearly heightened level compared to the time before the beginning of the electoral campaign. Investors’ concern is based above all on the polls carried out for the first round of voting. In these polls, the leader of the FN and the liberal candidate Emmanuel Macron were neck-and-neck with scores of around 26% each. So Le Pen is almost certain to make it into the run-off vote. In the opinion polls for the final vote Macron is in turn well ahead of Le Pen. As things stand at the moment, around 60% to 65% of…

Purchasing managers optimistic – business expectations at all-time high

The findings of the latest survey among European purchasing managers are as positive as they last were in spring 2011. An unusually sharp increase in orders, both in the service sector and industry, boosted production according to the survey results and also employment intentions in view of rising capacity utilisation. Price pressure on the purchasing side, resulting from the relatively weak euro, can be passed on to customers through higher prices. Business expectations for the coming twelve months were also very optimistic, with an all-time high recorded in the March survey. It should be noted that the question about business expectations has only been included in the survey since 2012. In Germany and France, the big EMU member states, sentiment among purchasing managers was considerably brighter. In Germany, industry delivered the most significant boost whereas the service sector is setting the pace in France. The combined Composite Index Production for…

Eurozone inflation rate rises to 2.0 percent – growing doubts over the direction of ECB policy

Now it’s happened. Today’s preliminary estimate for the development of consumer prices in February shows the inflation rate to lie at +2.0 percent, compared with the January rate of +1.6 and the December 2016 rate of +1.1 percent. The inflation rate has therefore exceeded the specified goal of the European Central Bank (ECB) for consumer price development of „below, but close to, 2 percent“ in a relatively short space of time. Part of the dynamic increase of recent months can be attributed to weather-induced price rises in the area of unprocessed foods. But accounting for the most important share by far is the recovery in the oil price compared with a year earlier which has significantly raised prices for energy in the consumer price basket. The effect of the low energy prices, which prompted the ECB to adopt its ultra-expansionary monetary policy with negative interest rates and asset purchasing programmes,…

France: The real winner is Macron

The French Left has decided to send the former outsider Benoit Hamon into the race as the Socialist candidate for the presidential election. The „socialist fundamentalist“ came out way ahead of his rival Manuel Valls by chalking up a good 58% of the votes in the final round of the primary elections. The left wing has therefore outmanoeuvred the economically-pragmatic right wing in the struggle for power within the party. Hamon was particularly successful at asserting himself over his moderate reformist rival Valls by making traditionally left-wing and progressive demands. With Hamon as their favoured candidate, the Socialists’ prospects of winning the presidential election have deteriorated once again, as the radical left still fails to appeal to the wider French public. At the moment, polls place him in fourth place. Yet former Prime Minister Valls is not the only one who may have to shelve his presidential plans; Fillon, the…

Euro area purchasing managers remain in good spirits

The preliminary publication of the results of the survey of purchasing managers in the EMU paints an optimistic overall picture of sentiment. Although the aggregated Composite Index was down slightly from 54.4 to 54.3 index points, this still leaves it significantly above the full-year average of 53.3 points. The index for the service sector shed 0.1 points and is now at 53.6 points. The sentiment barometer for manufacturing industry rose, by contrast, from 54.9 to 55.1 ticks. According to the survey institute IHS Markit, the better performance in industry is due to a significant increase in incoming orders from abroad. Overall, the hiring intentions in both sectors were higher than at any time since February 2008. Ultimately, this reflects the exceptionally optimistic assessment of the business outlook among the polled purchasing managers. But the increasing price pressure caused by higher commodity prices and the weaker euro exchange rate against the…

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