Between the good news and the very dark clouds, how to understand where the French economy is really going?

Workers work on an assembly line of electric motors at carmaker Stellantis’ factory in Tremery, eastern France, on January 27, 2022.

Workers work on an assembly line of electric motors at carmaker Stellantis' factory in Tremery, eastern France, on January 27, 2022.


Economic realities

Even if unemployment figures are good, investment is maintained and inflation is low, energy costs will weaken industrial production and threaten artisans. Is this a lag effect, or are there sectors in the French economy that are no longer growing rapidly?

Atlantico: According to INSEE, we are witnessing a slowdown in French inflation in December. Thus, the price increase in France reached 5.9% in December against 6.2% in November. In November, the number of job seekers registered under category A decreased by 2.1% compared to October. At the same time we are sounding the alarm for industry and craft (with the symbolic case of bakeries), and economic layoffs are mounting across the Atlantic. How to understand this contrasting panorama?

Don Diego de la Vega: The panorama is contrasting because we are in a break between two eras. On the one hand, the slow growth that started last February, so the moment we enter a phase of great weakness. We do this with food products, raw materials, etc. we see in the prices. But on the other hand, there are still the byproducts of the previous period, namely the post-pandemic growth in which the West experienced +6 growth thanks to fiscal stimulus and consumption recovery. . After the recovery from the Covid crisis, there was congestion in the logistics lines. We have workplaces, semiconductors, etc. created a sense of lack. It wasn’t actually a lie, but we suspected it wouldn’t last.

In France in 2022, we only have a growth increase calculated at the end of January 2022. This means that for the other eleven months we have had zero growth. If our growth is close to 2% in Europe, it is because we have a significant increase after 2021. The only reason for the contrast is that the traces of the previous era still remain from year to year. This is valid for a case that already has a lagged variable that we consider “timed out”. We are feeling the cuts, but the numbers don’t show it yet. It’s the same for real estate.

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So it’s a lag effect (bad news – or bad policies like monetary tightening and interest rate hikes – haven’t had their effects yet, but might not?

When interest rates are raised, the maximum impact is felt between 18 and 24 months. The really tough winter is therefore 2023-2024, as we will pay for monetary tightening in mid-2022.

Any good news yet?

It can’t be good news, all cursors are rotten. But this leads to certain reductions, such as raw materials. If prices are falling, it is because the market is anticipating a recession. This is the result of waiting for the difficult moment. In 2013, Francois Hollande spoke of an alignment of planets as interest rates and oil fell. But that’s only because we were in an economic depression and no one hoped for future growth. Maybe there is some budget support to allow craft and mid-level industries to survive for a few years, we can find local or sectoral solutions, we can save the bakers from election reasons, but there is no good news on a macro scale. Globally, we will only get 1.9% growth. And that probably means we Europeans should be lucky if we get to 0%. Of course, since we have an almost Soviet economy, it is not very cyclical in nature. Since our industry is almost non-existent anymore, the turnover won’t be very important. We will not have -4, but definitely 0. And it will probably be the same in 2024, because we will enter with a negative consciousness. If all goes well, in January 2025 our GDP will be at the level of January 2020. That’s half a decade of lost growth after a decade of weak growth.

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The head of “Amazon” announced that 18,000 employees have left. Is it because the economic situation has already overtaken them?

Amazon is still a box of entrepreneurial potential. Tesla also opened fire. Why? because these are companies that are still owned and invested in by their founders. Bezos, Musk and others are realistic, realizing that there will be no growth in the coming months. So even if they’re in fairly trendy fields, they know they have oil in their company and it’s time to tighten the screws to get through the course of the next two years, especially remote work. . Silicon Valley fires employees for this because bosses are entrepreneurs. Managers, bureaucrats, and bankers who don’t put their own money on the line don’t make layoffs. Because they don’t have money, he prefers to keep social peace by avoiding layoffs. Is this good news? Who does it all depend on? For a well-established executive, yes, for a newcomer or shareholder, obviously no. Productivity growth has been negative for 4 years and there is no unemployment. This is not normal. and we understand this only when companies are mostly run by bureaucrats. The downside is that it will take us longer to heal.

Do we know how great the challenges will be?

It is complicated to build. We don’t know exactly what the cash flow of VSEs is. It is also unclear what the state’s budget strategies will be to protect artists and others. From the beginning, I thought that PGEs would not be refunded. This type of debt can be forgiven. You must understand that France is walking on a thin layer of ice that can crack at any moment. We are at the point where analysts include European meteorological considerations for temperature and wind in the 2023 forecast. This is what we do for example for Venezuela or the countries of this order. What the French don’t understand is that crises don’t happen one after the other, they pile on top of each other.

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Are there sectors in the French economy that are no longer growing rapidly (large/small companies, industry/tertiary, metropolitan areas/rural areas, etc.)? Is everyone in the same situation?

The difference is between open and closed sectors. Tenant and entrepreneurial sectors. When you are in the process of accumulating productive resources, gathering knowledge, you commit yourself and embrace the cycle, both good and bad. In another move, you act as a parasite. I hear a lot about the divide between rich and poor, but 2022 was the worst year for stock and bond performance in a century (except for 1931 and 1969). The rich have it too. So everyone gets hits and everyone keeps getting hits. Ultimately, the difference will be between those who anticipate the situation and those who don’t. A good water container is necessary to cross the Tartar desert. 2022 was the opportunity to fill it. Besides, we don’t see very well where the end of the tunnel is.

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