L'offre devance la demande

Abstract

Supply Ahead of Demand Département des diagnostics Following the sharp pick up of the world output and trade, the slow-down observed since the beginning of 1995 is widely spread among the OECD coun- tries. Sluggishness of private consumption and lack of consumer confidence are common features, even if they partake of different business conditions, according to countries. Anglo-Saxon countries, especially the United States, are about to experience a soft landing with an extended borrowing boom on the consumer side. In Japan, the consumption weakness stems from of an exacerbated preference for liquidity ; it is feeding the deflationary risk that threatens the country. From obviously different starting points, the Anglo-Saxon area and Japan shouldn't experience growth rates higher than 2 % in 1996 and won't pull world growth. In Europe, the return of consumers to a precautionary behavior can hamper the carrying out of the investment plans currently envisaged by firms and thus stop the confirmation of a regularized expansion. The imbalances in the income sharing and the feeling of economic uncertainty explain this wait-and-see attitude. The European discrepancies, between countries whose currency is over- valued and those whose currency is or may get undervalued, also impede the European expansion capacity ; in the latter, the expected return of inflation and the change in monetary policy it feeds are about to restrain the domestic demand. The normalization of the monetary situation, as far as exchange rates are concerned, is needed for the European expansion to come back. It would correct the current distortions in competivity. This forecast assumes a slightly higher dollar, as part of such a normalization. — German economic conditions should contribute to undoing the European hang-up in 1996. In Germany, the additional income gained through widespread wage increases seems to be sufficient to overcome the consumers' reluctance. The German exporters should benefit from delivering more investment goods to European industry and from rebuilding their market shares. The German monetary policy would put up with this evolution. The German growth could come near to 3 % in 1996, from 2,5 % in 1995. In France, the recovery broke during the first half of 1995, after the 1994 bolting. A less buoyant European environment and a more restrictive monetary context than expected have markedly weighed on activity. Will the current plateau lead to a downturn or to a restart ? The business pessimism hasn't curbed the spending behavior yet : hiring has developed though partly on part- time or temporary bases. Individual wages have speeded up. Planned investments have not been challenged. Inventories, on the contrary, have suffered from the downturn in expectations. The logic of this forecast relies crucially on the future private consumption. More wages and welfare benefits should sustain the increase in global income, in spite of tax increases. A revival of the external demand from early 1996 should reinforce exportations. The growth of business investment could then develop, as no financial constraint would impede spending. On the contrary, the environment should be more restrictive for public investment and consumption ; housing would decrease. In spite of the resumption of stock piling, the GDP growth would decelerate to 2,5 % next year from 2,9 % this year. The expected revival depends on economic policy assumptions. The financial normalization could come up against intra-European pressures and worry firms. A more cautious behavior in hiring and wage setting would hamper the revival process. Finally, households are getting sensitive to the depreciation of their assets, be they financial or real estate. The GDP growth, though weak, should enable a marked decrease of unemployment : a more job-oriented growth, the stress on social treatment and a slower increase of workforce should help. Slightly exceeding the growth of the potential output, the GDP growth could not fill the gap inherited from past years up to the horizon of this forecast. The French economy would thus post persistent excess capacities, with all the disinflationary pressures it implies.