Written by Hilary Barnes
The Markit purchasing manager index for France shows the PMI plunging far faster than the GDP index, causing speculation, notably in a Reuters story on March 20th, that the French economy is about to slump in a serious way. Reuters used the words “crisis levels.”
Click on graph of French data for larger image.
But by comparing a business climate index published by INSEE, France’s official statistics office, and GDP, suggests that this conclusion is a little hasty.
The chart below recalculates quarterly volume GDP for France by making 1q 2007 = 100. It puts the INSEE monthly business climate indicator on the same base.
The variation in the GDP index is four whole points. The variation in the business sentiment index is 36 points (The chart used February, May, August and November as proxies for a business sentiment quarterly measure).
For a 35 point drop in the business climate indicator between 2007 2q and 2009 3q, the GDP index fell by 3.6 points.
The business sentiment indicator has dropped 18 points from 1q 2011 to 1q 2013. Does that mean that the GDP indicator will fall by 1.8% (from 100.6 in 1q 2011 and the same level in 3q 2013 and 99.9 in 4q 2013) to 98.8 within the next couple of quarters?
Doubtful, but perhaps not so doubtful if one is looking at the final quarter of 2013 or perhaps in the first half of 2014.
See also GEI News article on Eurozone PMI published today.