France is a key economic and political player in the 28-nation European Union, and the country's economic indicators can often exert a marked influence on the tendencies and future prospects for the euro. The nation had the world's sixth-largest economy in 2015, as ranked by the World Bank.
France is considered by many economists to be a mixed economy, with several state-run companies and strong government participation in some major private companies.
Government spending accounts for more than half of total domestic output, and the country's budget has been in chronic deficit. France's GDP has a weight of about 23% in the eurozone, which makes it the second-largest economy in the region behind Germany (weight of around 30%).
Despite the size of its economy, France is ranked as only the 32nd most economically free nation out of 43 countries in Europe. Additionally, France ranks 72nd on the Heritage Foundation's global index of economic freedom, which is lower than Mexico but still ahead of European peers Portugal and Italy.
Details about key economic indicators for the nation are as follows.
Sources Of Economic Data On France
The National Institute of Statistics and Economic Studies (INSEE) is the French national statistics agency. It's responsible for overseeing and publishing the national census, and several important national economic indices. INSEE statistics are important components for the EU to compile statistics for broader European economic bloc, and the institute is subordinated to the French government ministry of economy.
Other sources of reliable economic data on France include the Banque de France, the European Central Bank, European statistics agency Eurostat, the Organisation of Economic Cooperation and Development, the World Bank and the International Monetary Fund.
Gross Domestic Product (GDP)
Among the most important statistics compiled by Insee is the French gross domestic product (GDP).
The GDP is commonly considered the broadest measure of national income, taking into account production of all goods and services in the economy from both the private and public sectors. GDP change from quarter to quarter is used to determine the pace of a country's economic growth, and ultimately gauge the success of its economic policies. It also serves as a key influence behind other important economic indicators, such as inflation and interest rates.
INSEE publishes an estimate of GDP growth 30 days after the end of each quarter and later publishes revised estimates at later dates. The annual growth rate in France since 1949 has averaged 0.79%.
Industrial production, which is sometimes referred to as industrial output, is an important gauge of the strength of a country's manufacturing sector. French industrial production data is released by INSEE on a monthly basis. Manufacturing accounts for about 86% of France's industrial production, and the country's industrial production has grown at an average of 0.16% since 1981.
France publishes official unemployment figures on a quarterly basis according to criteria defined by the International Labour Organisation. The country's labour force survey is conducted among 65,000 households, covering all individuals aged 15 or older. The unemployment rate is considered to be an important indicator of activity in the country's economy. Its unemployment rate has averaged about 9.3% since 1996, when it began tabulating the figure according to current criteria.
France's headline inflation rate is described by the country's consumer price index, which measures commonly consumed food, energy and service prices. Since the French government began reporting on inflation in 1958, it has average at around 4.5% annually in the country. France also releases a producer price index, which tracks the change in prices of goods and services sold by manufacturers and producers in the wholesale market. Both indices are published by INSEE on a monthly basis.
INSEE also releases monthly data on consumer behaviour and sentiment. Among these are household consumption expenditures that include expenses paid by households, not covered by the federal government, such as social security spending. The country also publishes information monthly on consumer confidence.
The survey's aim is to collect information on consumer behaviour and expectations in terms of expenditure attitudes and savings. Survey items include questions on consumer opinions about the general economic situation in France, their own financial situation and their intentions in terms of saving and expenditures.
Interest Rate (ECB)
As it is a member of the eurozone monetary system, France's base interest rate and the interest rates practiced by the banking system in its economy are determined by the European Central Bank (ECB).
The ECB aims to achieve euro-area inflation rates of below, but close to, 2% over the medium term. The bank's monetary policy committee holds interest rate meetings every six weeks. The euro-area interest rate has averaged 2.15% annually since 1998.
Retail trade figures are a useful measure of the temperature of French consumer activity and whether consumers are comfortable spending on discretionary items. INSEE releases figures on French consumer trade on a monthly basis. Growth of retail trade sales has increased by an average of about 0.2% per month since 1995.
France's government publishes information on debt and budget figures on a quarterly basis. The data is compiled based on criteria defined by Europe's Maastricht treaty.
As a member of the eurozone, France has full control over its public sector budget, but not full control over European monetary conditions that can also affect the country's finances. Under terms agreed to in Europe's growth and stability pact, France and other EU countries must seek to post a government deficit of less than 3% of GDP and public sector debt of less than 60% of GDP.
However, France has run chronic debt and deficits higher than these levels. France's overall debt and deficits weigh against the overall fiscal balance in the eurozone, and ultimately contribute to a weakening trend for the euro.
Balance Of Trade
France's trade balance describes the country's exports and imports of physical goods to and from destinations abroad. French foreign trade statistics—except for statistics on petroleum products—are recorded according to the "special trade" method. This means that only goods that actually enter or leave the national economy are recorded, and goods that are imported and then re-exported unchanged are not. France's Economy Ministry reports on France's trade balance on a monthly basis.
Balance Of Payments
Balance of payments data measures all transactions between residents and non-residents, including entities such as banks, companies, individuals and government offices.
The balance of payments is made up of current account transactions and capital account transactions:
- Current account transactions include trade in goods and services and income transfers.
- Capital account transactions represent financial transactions of individual and institutional residents with residents in foreign countries. They can include direct investment, portfolio investment, financial derivatives transactions, and other investment and reserve assets.
Balance of payments data also includes France's net international investment position, which represents the net wealth of French residents in comparison to the rest of the world. A negative net international investment position means that French residents received more capital flows from abroad in the form of debt or capital investment than they invested in foreign countries.
As a whole, the balance of payments gauges net money inflows into and out of an economy. It also reveals whether the participants in the economy will need to draw on more or less currency from abroad to finance their economic activities. For this reason, balance of payments indicators are closely watched by economists and traders, and can have strong impacts on the value of currencies.
The balance of payments and the international investment position are compiled by Banque de France and released on a monthly basis. France has posted an average current account deficit of about 0.1% of GDP since 1980.
France has traditionally been a major player in the eurozone. Its economy and policies carry a significant weight in determining the outlook for the euro and the currencies with which it is paired.
By familiarising themselves with the key indicators reported from the French economy, traders can gain better insight into tracking overall trends for eurozone and its currency.
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Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…