Credit Agricole Group news

The Credit Agricole leading indicators suggest a growth rate between 0.4% QoQ and 0.5% QoQ for the 2nd quarter of 2010. As a result, we have revised our GDP growth forecast for the 2nd quarter up from 0.2% QoQ to 0.4% QoQ.

The Credit Agricole leading indicators point to a pick up in activity in the 2nd quarter of 2010. The indicator based on survey data suggests a growth rate of +0.5% QoQ, while activity data indicates a more modest growth rate of 0.4% QoQ. We maintain our initial forecast of 0.3% QoQ in the second quarter.

We have revised our Q2 GDP growth forecast to 1.3% q/q (compared with the initial 0.9%), in line with the upside risks signalled in the Crédit Agricole leading indicators. The indicator based on survey data points to a GDP growth rate of 1.1% q/q in Q2 2010, while that based on activity data indicates growth of 1.5% q/q.

The Crédit Agricole leading indicator based on survey data points to GDP growth of 0.2% q/q in France for the second quarter of 2010. The indicator based on activity data suggests growth of 0.4% q/q. We are leaving our forecast of 0.3% growth q/q unchanged.

French household consumption has slowed sharply since the financial crisis hit. The accompanying recession led to a severe deterioration in the labour market and hence to a slowdown in income from activity and increased uncertainty as a result of a rising unemployment rate. The crisis also led to a sharp fall in asset prices, with stock market indices and interest rates falling, lower house prices, etc., and hence a reduction in the value of household wealth. Since the pick-up in activity which began in early 2009, the labour market has continued to deteriorate, but at the same time, asset prices have risen. In view of this, it is worth asking how household consumption is behaving as France emerges from the crisis.

Market participants face seriously limited visibility on the pace of near-term growth, particularly for the advanced economies. However, we do not believe that the global economy is about to fall back into a recession. A double-dip - which is not the central scenario we choose - would most likely drive rates even lower, but bond price upside is fairly limited, particularly at the front end. In the event that the US did become the first to slide back into recession, the USD would be hard pushed to find any support, at least initially. As the downturn shifts from local to global, it would become clear that there is nowhere to hide from a double-dip scenario. Against this backdrop, the USD would likely regain its status as a safe-haven play.

On 30 June, the French government presented a preparatory report in the run-up to the forthcoming public finance policy debate. The report sets out the main measures that need to be taken to cut public deficits in 2011-2013 from 8% in 2010 to 3% of GDP in 2013. A full, detailed, three-year budget for 2011-2013 will be presented in the autumn.

The markets are currently imposing on Europe a more brutal tightening of fiscal policy earlier than expected. But that does not mean that the two other constraints have disappeared: central banks should normalise the settings of their monetary policy as soon as conditions are met, while there is a 'strong obligation' to maintain a certain level of growth. How this can be done is not at all clear, and there are fears that the markets will find it difficult to extract themselves from this new 'Bermuda Triangle' - not forgetting that the triangle can easily shift from one place to another within the region formed by the advanced countries.

The markets are currently imposing on Europe a more brutal tightening of fiscal policy earlier than expected. But that does not mean that the two other constraints have disappeared: central banks should normalise the settings of their monetary policy as soon as conditions are met, while there is a 'strong obligation' to maintain a certain level of growth. How this can be done is not at all clear, and there are fears that the markets will find it difficult to extract themselves from this new 'Bermuda Triangle' - not forgetting that the triangle can easily shift from one place to another within the region formed by the advanced countries.

While the economic crisis undergoes its multiple transformations, two recent announcements-the creation of a "synthetic cell" and a new family of components that opens the way for quantum computers-come as reminders that technology is continuing to progress. Information technology has been the innovation fueling economic growth for the past 50 years. Will nanotechnology be the engine for the next cycle? Nanotechnology is extraordinarily promising, but also raises issues of societal choice that call for citizen participation.

While the economic crisis undergoes its multiple transformations, two recent announcements-the creation of a "synthetic cell" and a new family of components that opens the way for quantum computers-come as reminders that technology is continuing to progress. Information technology has been the innovation fueling economic growth for the past 50 years. Will nanotechnology be the engine for the next cycle? Nanotechnology is extraordinarily promising, but also raises issues of societal choice that call for citizen participation.

Bank lending patterns during the current upturn in the euro area are surrounded by a number of questions. 2009 saw the euro zone's most severe contraction in GDP since the post-war period. The recession was accompanied by a sharp decline in demand for loans. On the credit supply side, the financial crisis impaired the conditions for banks to raise funds, and therefore their capacity to lend. But the slowdown in bank lending to the private sector lagged the contraction in GDP, and was less pronounced.

Bank lending patterns during the current upturn in the euro area are surrounded by a number of questions. 2009 saw the euro zone's most severe contraction in GDP since the post-war period. The recession was accompanied by a sharp decline in demand for loans. On the credit supply side, the financial crisis impaired the conditions for banks to raise funds, and therefore their capacity to lend. But the slowdown in bank lending to the private sector lagged the contraction in GDP, and was less pronounced.

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