Real Estate Price in France – Two simple measures of dearness

INSEE, the French statistical institute, has just released the real estate price index for the last quarter of 2013 (existing home index). With a decrease of -1.4% it is just a little below last year level. That’s what the first chart below shows. After a strong uptrend profile until 2006, the index dropped during the crisis. The question is to know if the price now is cheap or still expensive. I have looked at two simple measures to gauge the real estate price. We need comparison for that: a price by itself is meaningless. Continue reading

Employment – France vs Germany: Two different pictures of the business cycle

New Information on labor markets in France and Germany have just been published for January.
In France the number of unemployed registered at Pôle Emploi was published. Pôle Emploi is the French agency on unemployment. In Germany, employment statistics for January were released.
The two sets of information are not directly comparable but both are signals on the labor market momentum. Continue reading

The Economy in the Euro Area in 2 Charts and a Table

The upward trend in activity in the Euro Area gathered pace in the last quarter of 2013. 0.3% GDP growth (1.2% annualized) on the previous quarter prolonged the improvement observed since spring.
The long period of decline in activity that was recorded from spring 2011 to the first quarter of 2013 appears to be over.

The first chart shows the GDP profile in the Euro zone countries since 2006. It is clear that at the end of the period there was an upturn in the trend in most countries. However, on average, these profiles follow a moderate pace. Meanwhile, GDP in the Euro zone and most countries is still below their pre-crisis level (I took the first half of 2008 as a reference). Continue reading

The European economy is on a knife-edge

The economic outlook for the Euro Area is more upbeat. This is the message conveyed by business leader surveys. Since the autumn, the situation has clearly improved, suggesting that the economy has at long last exited the long and painful period of recession.
Last week, European Central Bank governor Mario Draghi jumped at this scenario of a more robust economic environment, which ultimately enabled him to maintain the status quo.

One can see clearly the interpretation that can be made of the current environment in the Euro zone and the hopes it can give rise to.
If growth settles on a more solid trajectory then imbalances, which are still present, will gradually fade away. This is another reason why the acceleration in the economic cycle must be encouraged and no longer burdened with a whole set of constraints. In France, the concept of strengthening corporate margins, outlined at François Hollande’s press conference back on 14 January, is attractive as its purpose is to enable companies to lock in and then amplify the business improvement. Continue reading

ECB: Monetary Policy and the Euro Area

The post is available in pdf format here ECB-MonetaryPolicy

The ECB is in a corner. Its rates are close to 0% with the refi rate at 0.25%. Lowering it at 0.1% would not change the picture and is probably not the recipe to bring the Euro exchange rate lower. In November when the refi rate was cut from 0.5% to 0.25%, the impact on the euro/dollar parity was hardly seen. The deposit facility rate is at 0%. Taking it lower would bring it in negative territory. Is such a move, which could destabilize banks, reasonable just before the Asset Quality Review? Probably not.
So the ECB could increase its liquidity to supplement the Zero Lower Bound problem as it has been done in other central banks. But there are questions on the kind of assets it can buy: Not public debt, not banking assets as during the LTRO because 2014 is the year that will settle the Banking Union. And now the OMT is at risk after the German constitutional court decision.
All this is problematic as deflation threats. The adjustment mode within the Euro Area leads to reduce costs and to follow the global economic cycle that is picking up. The risk of deflation is not null but what are the tools the ECB needs to fight it? Continue reading

Video – The Second Machine Age – Thoughts on New Technologies


After the publication of their book, the Second Machine Age,  Andrew McAfee and Erik Brynjolfsson give an interview on their thoughts on the acceleration of technical progress and its impact on the economy, on the labor market and on education.

The first industrial revolution was an automation of physical tasks (steam machine). It helped to reduce physical efforts.The current industrial revolution is a cognitive revolution where due to rapid acquisition and accumulation of information, the machine can decide in place of men.

This will change dramatically the forms of labor. The two authors say that the change will  probably go faster than what we imagine. We will have to be reactive and proactive.

For information, visit their dedicated website

USA: Is Real Estate Expensive?

The real estate market is at the heart of the U.S. recovery. The rebound and reactivation of this market are clearly visible on the evolution of home sales. This is the chart below.
The rebound since summer 2010 is spectacular even if it does not compensate, far from it, the drop observed since the beginning of the crisis in 2006/2007. Specifically, the recent downturn reflects the impact of rising mortgage interest rates seen since the late spring. Continue reading