What is the Momentum in France and Euro Area?
Philippe Waechter, Chief economist of Natixis Asset Management, shares his analysis of the current economic situation in France and Euro Area.
" (...) 2012 and 2013 have been two years of recession for the Euro Area and for important countries such as Italy, Spain, Netherlands and Portugal. But even in Germany and in France the momentum was low. Carry-over for 2014 is weak and does not reflect a strong exit of recession. That’s the weakness of the Euro Area; there is no source of long-lasting positive impulse.
From data of the first quarter and what we know from the second, the source of this low momentum comes from low internal demand specifically on investment. The risk of deflation that can be seen in an inflation rate at 0.4% in July is related to wage negotiations. Low inflation rate will lead to low wage indexation and this will not reinforce consumption and internal demand. That’s why a lot of resources have to be put on investment (public and private)."