An earlier write-up of July Eurozone monetary statistics drew attention to a contraction of real M1 deposits in France, in contrast to rising growth in Germany and other “core” countries. The six-month fall in French real M1 deposits in July, indeed, was on a par with Spain and Italy, suggesting dismal French economic prospects:
Today’s “flash” purchasing managers’ surveys for September provide earlier-than-expected evidence that France is diverging negatively from the rest of the core. The Eurozone manufacturing PMI edged up from 45.1 to 46.0, driven by a rise from 44.7 to 47.3 in the German index. France’s manufacturing PMI, by contrast, slumped from 46.0 to a three-and-a-half-year low of 42.6. The French services survey also weakened as Germany’s strengthened – the following chart, from PMI compiler Markit’s press release, shows the French composite output index:
The French government is forecasting GDP growth of only 0.8% in 2013 but even this requires a swift recovery in monetary trends. Tax-heavy fiscal tightening aimed at reducing the budget deficit from 4.5% of GDP in 2012 to 3.0% next year, to be confirmed in the 2013 Budget released on 28 September, looks increasingly misguided and self-defeating.