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Date: Fri, 23 Nov 2001 01:00:59 -0800 (PST)
From: sh-ubsw-european-economic-research@ubsw.com
To: harora@ect.enron.com
Subject: French GDP, the last good news before the fall?
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French GDP, the last good news before the fall?



GDP (Q3)
Actual: +0.5%qoq, +2.0%yoy
UBS Warburg: +0.3%qoq, +1.8%yoy
Consensus: +0.3%qoq, +1.8%yoy
Previous: +0.2%qoq, +2.2%yoy



French GDP is clearly a good surprise. However it owes much to one off 
effects from tax cuts which boosted consumption. The other elements of the 
GDP have remained quite weak. If consumption falters next quarter (as we 
expect) GDP growth could end up being much lower. Hence we remain very 
cautious on the medium term.
French GDP accelerated in Q3 at +0.5% qoq. Part of this good news is 
however due to the fact that Q2 was revised down (+0.2%qoq instead of 
+0.3%).



* Household consumption is the reason for the good number, it was up 1.2% 
qoq (after +0.3% in Q2) and contributed to 0.7% to GDP growth. This good 
performance is essentially the result of one off tax cuts, notably the 
employment premium paid at the beginning of September. These effects should 
vanish away in Q4 and the preliminary information available for October 
retail sales indeed support this view.


* Other elements of final domestic demand are much more modest. Investment 
remained virtually flat with a mere +0.1% qoq increase. We expected a 
contraction hence the resilience of investment is a small positive for us. 
However, investment should remain in the doldrums as long as 
industrialists' prospects are as low as currently.


* Stocks contributed negatively (-0.4% qoq) to growth. This is not really a 
surprise given the surge in consumption. But this is a positive element for 
next quarter, stocks are likely to be back up.


* Both exports and imports plummeted again reflecting the deterioration of 
international trade. Exports were down 1.5% qoq (like in Q2) while imports 
fell 1.5% qoq as well (after -1.0% in Q2). Overall, the contribution from 
net trade was thus flat, in line with our expectations. But this could go 
into negative territory as foreign demand will continue to weaken.





St?phane D?o
Economic Research
UBS Warburg
Tel : +33 1 48 88 30 36
Fax : +33 1 47 63 48 08
Mob : +33 6 76 85 33 18
Stephane.deo@ubsw.com