France - Stock Market and Economy
Introduction to the Economy
France is in the midst of transition from a well-to-do modern economy that has featured extensive government ownership and intervention to one that relies more on market mechanisms. The government has partially or fully privatized many large companies, banks, and insurers, and has ceded stakes in such leading firms as Air France, France Telecom, Renault, and Thales. It maintains a strong presence in some sectors, particularly power, public transport, and defense industries. The telecommunications sector is gradually being opened to competition. France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that reduce income disparity and the impact of free markets on public health and welfare. Widespread opposition to labor reform has in recent years hampered the government's ability to revitalize the economy. During 2007-08, the government implemented several important labor reforms, including a de facto extension of the 35-hour workweek by allowing employees to work longer overtime hours. During 2009, the government is expected to delay or even renounce other reform efforts due to the on-going financial crisis. GDP growth dropped to 0.7% in 2008; the French government plans to increase public investment and continue injecting capital into the banking sector to alleviate the negative effects of the crisis during 2009. As a result of lower fiscal revenues and increased expenditures the general government deficit is expected to exceed the eurozone's ceiling 3% of GDP. France's tax burden remains one of the highest in Europe - at nearly 50% of GDP in 2005. With at least 75 million foreign tourists per year, France is the most visited country in the world and maintains the third largest income in the world from tourism.
(Source: https://www.cia.gov/library/publications/the-world-factbook/geos/fr.html )
GDP Figures
GDP (purchasing power parity): $2.097 trillion (2008 est.)
GDP (official exchange rate): $2.978 trillion (2008 est.)
GDP - real growth rate: 0.7% (2008 est.)
GDP - composition by sector: agriculture: 2.2%
industry: 20.3% services: 77.4%
| GNP (Gross National Product), 2005 : | 2177.67 billion dollars |
Economic Indicators
Leading Index
In June,2008 , the leading index declined for the eighth consecutive month, primarily as a result of largedeclines in the stock market and industrial new orders components. New unemployment claims(inverted) continued to be the largest positive contributor to the index in the last two months. SinceDecember, the leading index has declined by 1.8 percent (about a -3.7 percent annual rate), wellbelow the 0.5 percent annual rate of decline that prevailed during the last half of 2007. In addition,the weaknesses among the leading indicators have remained very widespread in recent months.
In June,2008 , the leading index declined for the eighth consecutive month, primarily as a result of large
declines in the stock market and industrial new orders components. New unemployment claims
(inverted) continued to be the largest positive contributor to the index in the last two months. Since
December, the leading index has declined by 1.8 percent (about a -3.7 percent annual rate), well
below the 0.5 percent annual rate of decline that prevailed during the last half of 2007. In addition,
the weaknesses among the leading indicators have remained very widespread in recent months.
Coincident Index
The coincident index remained unchanged in June 2008, and index levels were revised slightlydownwards between February and May as new quarterly data became available for the wages andsalaries component. During the last six months, the coincident index increased by 0.2 percent(about a 0.5 percent annual rate of growth), which is well below the 1.5 percent annual rate ofgrowth that prevailed during the last half of 2007. In addition, the weaknesses and strengths amongthe coincident indicators have been balanced in recent months.
THE CYCLICAL INDICATOR APPROACHHistorically, the cyclical turning points in the leading index have occurred before those inaggregate economic activity, while the cyclical turning points in the coincident index have occurred atabout the same time as those in aggregate economic activity.
France Composite Indexes: Components and Standardization Factors
Sr No.
Leading Index
Factor
1
Yield Spread, 10 year minus Day-Day Loan
0.1073
2
Stock Price SBF 250 Index
0.0328
3
Building Permits, residential
0.0409
4
New Unemployment Claims
0.1176
5
Industrial New Orders
0.0482
6
Production Expectations
0.0382
7
Ratio Deflator of Manuf. Value Added to Unit Labor Cost
0.615
Sr No.
Coincident Index
Factor
1
Industrial Production
0.064
2
Personal Consumptions
0.0355
3
Number of Employees
0.6072
4
Wage and Salaries
0.2933
The coincident index remained unchanged in June 2008, and index levels were revised slightly
downwards between February and May as new quarterly data became available for the wages and
salaries component. During the last six months, the coincident index increased by 0.2 percent
(about a 0.5 percent annual rate of growth), which is well below the 1.5 percent annual rate of
growth that prevailed during the last half of 2007. In addition, the weaknesses and strengths among
the coincident indicators have been balanced in recent months.
THE CYCLICAL INDICATOR APPROACH
Historically, the cyclical turning points in the leading index have occurred before those in
aggregate economic activity, while the cyclical turning points in the coincident index have occurred at
about the same time as those in aggregate economic activity.
France Composite Indexes: Components and Standardization Factors
| Sr No. | Leading Index | Factor |
| 1 | Yield Spread, 10 year minus Day-Day Loan | 0.1073 |
| 2 | Stock Price SBF 250 Index | 0.0328 |
| 3 | Building Permits, residential | 0.0409 |
| 4 | New Unemployment Claims | 0.1176 |
| 5 | Industrial New Orders | 0.0482 |
| 6 | Production Expectations | 0.0382 |
| 7 | Ratio Deflator of Manuf. Value Added to Unit Labor Cost | 0.615 |
| Sr No. | Coincident Index | Factor |
| 1 | Industrial Production | 0.064 |
| 2 | Personal Consumptions | 0.0355 |
| 3 | Number of Employees | 0.6072 |
| 4 | Wage and Salaries | 0.2933 |
The component factors are inversely related to the standard deviation of the month-to-month changes in
each component. They are used to equalize the volatility of the contribution from each component and are
“normalized” to sum to 1.
(Source: http://www.conference-board.org/pdf_free/economics/bci/FraJun08.pdf )
The economic series as estimated is given below for some of the key indicators of economy of France:
Stock Market (2008)
The French stock market is part of Euronext.
For French stocks the best known index is the CAC 40
There are mainly 6 indices of French Stock Market. They are:
| France | CAC 40 | +197.37 | +6.61% | 3,185.38 | 12/8 9:17am |
(Source: http://money.cnn.com/data/world_markets/)
Monetary Variables
Consumer Price Index
In February 2009, the consumer price index for all households in the whole of France rose by 0.4% (+0.2% in February 2008). The year-on-year price increase was +0.9%. The core inflation went up by 0.3% in February (the year-on-year price increase was +1.9%).The growth in the consumer price index was the consequence of the rise in prices of transport and communication services, actual rentals, water supply and refuse collection and other services, due to to the winter holidays and to changes in public prices. The prices of clothing and footwear and of other manufactures expanded also, due to the end of the winter sales. Prices of energy increased again. The price index adjusted for seasonal variations went up by 0.3% (+0.1% in February 2009). The HICP rose by 0.4% (+1.0% year-on-year).Inflation rate (consumer prices): 1% (2008 est.)
Commercial bank prime lending rate: 6.6% (2008)
Stock of direct foreign investment - at home: $1.234 trillion
Stock of direct foreign investment - abroad: $1.889 trillion
Economy (2008)
France Introduces a $33 Billion Economic Stimulus Plan ( December 4, 2008)
France will spend $33 billion over the next two years to soften the blow of the global downturn and limit the effects of increasing unemployment, President Nicolas Sarkozy said
The French economy technically escaped recession in the third quarter, expanding by 0.1 percent. But most economists predict that it will contract in the months to come.
(Source : http://www.nytimes.com/2008/12/05/world/europe/05stimulus.html)
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