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Saturday
Nov122005

Not all gloom and doom in France

1f826966-4420-11d8-81c6-0820abe49a01.jpg After nearly two weeks of social unrest in France the big European country could well use some good news. The economic growth figures for the third quarter seem to fulfill this objective and shows a healthy development for the French economy despite the riots in Paris.

"The riots will affect confidence and may even affect the pattern of consumer spending but it will be hard to spot any effect on the aggregate growth figures," said Rob Carnell, senior economist at ING in London. See article from Daily Times.

"Two key economic indicators spelled good news for the French economy Thursday.

First, the French economy grew by 0.7 percent in the third quarter from the figure in the second quarter, the official statistics institute INSEE reported on Thursday. Separately, INSEE also reported that French consumer prices fell by 0.1 percent in October from the September figure, cutting 12-month inflation to 1.8 percent from 2.2 percent in September." - See article from Expatica.com

Generally, key indicators of the economy such as inflation, export figures, and consumer confidence seem to be moving slowly in the right direction;

"A 13 percent drop in the euro against the dollar this year has brightened prospects for European exporters such as France's Schneider Electric SA, the world's largest maker of circuit breakers (...)

French consumers stepped up spending as oil prices retreated from a record and government-subsidized hiring pushed down unemployment from a 5 1/2 year high (...)

The French inflation rate slid to 2 percent in October from 2.4 percent in September, Insee, the national statistics office, said today. Crude oil prices have fallen 17 percent from an Aug. 30 record of $70.85 a barrel. They fell today to less than $59."

See article from Bloomberg.

The improvement of the French economy is good news not only for France but also for Europe. However, I think it is fair to say that we have a long way to go and in that view good news in Europe concerning the economy is particularly welcome at a time when the large countries of Europe are showing weak economic figures compared to USA.

Friday
Nov112005

The Economist's thoughts on the Paris riots

 _40962136_carbody.jpg
Although the riots in Paris are far from resolved I believe the coverage of the recent events are well summarized and analyzed in this week's edition of the Economist.

Particularly the magazine's leader is a good read and I agree with the major points. "A much greater contributor than Islam to the malaise in the suburbs is the lack of jobs." See article here (non-walled article). I think this is a point very well made. The structural uemployment rate in France of almost 10% is is a problem which affects the Paris suburbs particularly hard.

"The main answer is that the French labour market is throttled by restrictions such as the 35-hour week, a high minimum wage, and tough hiring and firing rules."

As I have reported before the 35 hour working week is cutting rather than creating jobs. The Economist's special report (walled for non-subscribers) digs deeper into the analysis - 

"For all young people in France these days, proper jobs are scarce (...) The reason is what economists call an “insider-outsider” labour market: full-time permanent jobs are so protected by law that employers try not to create many, preferring instead temporary workers or interns whom they can shed more easily when times get tough."

The blogosphere has been swarming with post about the riots and on Technorati the events in France have been on the top 5 list for over a week ... I can particularly point to the Fistful of Euros which have had a good coverage of the riots.

Wednesday
Nov092005

Neweconomist on India's niche in globalization

mapofindia.jpg When economists and politicians invoke examples of how emerging economies are shaping the global arena, they are most likely to point to the Red dragon. However, we would wise also to look elsewhere for emerging economies that have an astounding impact on the global economy and thus how we live today.

In the theoretical sphere of economics (is there any other?) you have the notion of the so-called BRIC countries (Brazil, Russia, India, and China) who are believed to have enormous influence on the global economy now and even more so in the future. See this report from Goldman Sachs.

"The results are startling. If things go right, in less than 40 years, the BRICs
economies together could be larger than the G6 in US dollar terms. By 2025
they could account for over half the size of the G6. Of the current G6, only the
US and Japan may be among the six largest economies in US dollar terms in
2050. "

As reported in the London based Neweconomist blog we are focusing on India and how the country has created a niche in the global economy of providing ground for the outsourcing of currently 44% of the global market for IT services and IT-based business processes. The original source of this information is this report from Deutche bank research describing India as the "back-office of the world."

"As the world’s most important offshoring
location the subcontinent dominates the international market for the outsourcing of
IT service ...

(...)

India’s key comparative advantage is its
availability of well-trained, English-speaking and inexpensive specialists."

If you want to dig further into the offshoring capabilities of India you can read these four articles from the Economist which provide a good overview of the off-shoring and outsourcing business in India.

India aims to become the back office for the world's banks - feb 2003

India becomes a defender of free trade - feb 2004

After the call-centre, now the IT department is off to India

(...) information-technology industry is already choking on its own success; but the boom has barely begun

India must truly be a force to be reckoned with.