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COPING WITH GLOBAL UNCERTAINTIES Report on the 1990 French National accounts

English Edition

lillllli~l INSTITUT NATIONAL 1S ECONOMIC UU,

Republic of France Institut national de la statistique et des études économiques

COPING WITH GLOBAL UNCERTAINTIES

REPORT ON THE 1990 FRENCH NATIONAL ACCOUNTS

ENGLISH EDITION

Directeur de la publication: Jean-Claude Milleron © 1991 by Insee. All rights reserved. No part of this book may be reproduced in any form, by photostat, microfilm, xerography, or any other means, or incorporated into any information rctrieval system, electronic or mechanical, for any purpose other than those defined in article 41 of the French copyright law of March 11, 1957, without the written permission of Insee.

2 1990 NATIONAL ACCOUNTS

Note to the English edition

At the end of June, Insee issues the Rapport sur les comptes de la Nation (report on national accounts), which analyzes the economic developments of the preceding year and serves as the basic for preparing the country's next budget. The report is prepared by the Institute on behalf of the French govemment and in collaboration with the Direction de la Prévision (finance ministry forecasting office), the Comptabilité Publique (government accounting office) and the Bank of France. The first part of the 1990 report was published as 1990: la France à l'épreuve des turbulences mondiales. Drafted under the supervision of Jean-Charles Willard and Myriam Finidori, it contains: - The standard year-in-review section. - A detailed comparative analysis of French and German external performance. Despite the two countries' comparable growth rate and labor productivity, former West Germany posted a current-accourt surplus equal to 4% of its GDP, white France ran a 1% deficit (at 1989 prices). One of the causes of this differential is that Germany spends more on research and development, that these outlays are more evenly distributed throughout its economy, and that their practical results are more rapidly disseminated. - 61 notes with charts and tables on 1989-90 developments analyzed from a medium-terni perspective, and grouped under eight sections:

1. The world slowdown. 2. The reasons for the persistence of France's external deficit. 3. The business environment: continued pressures on productive capacity, and new patterns of investment behavior. 4. Employment: no immediate downward cyclical adjustment. 5. Household income: growth in nominal wages and salaries; the role of transfer payments. 6. Consumption: the spending cutback; rise in the saving rate and financial investment rate. 7. Money and financial markets: the success of mutual funds. 8. General government: a lower deficit; enactment of the Contribution Sociale Généralisée (CSG), a social-security tax levied on earned and unearned income.

The second part of the report, issued in a separate volume as Comptes et indicateurs Economiques and also available on diskettes, contains ail the detailed figures including data on other countries to permit international comparisons.

To order copies of the original French edition, please use the order form (page 37)

This English abstract of the year-in-review section was prepared by Edmonde Naulleau (Insee) and Jonathan Mandelbaum (translator and editorial consultant).

1990 NATIONAL ACCOUNTS 3

CONTENTS

Overview.................................................................................... 7 Sharp fallback in the growth rate ...................................................... 9 Employment: continued buoyancy ................................................... 10

Decline in short-term employment ................................................................... 11 Year-end hait in the unemployment fall ........................................................... 14 Sharp increase in job-seekers among the most highly qualified categories........... 14

Fixed capital formation in the manufacturing industry kept constant through heavier indebtedness ......................................................... 14

Continued investment in capital goods ............................................................. 14 Corporate operating margins narrowed by the rise in real wages ..................... 14 Saving rate depressed by surge in finance charges ........................................... 16 Greater use of bank credit ................................................................................. 17 A mixed year for large public-sector firms ....................................................... 17

Household income unaffected by slower growth .................................... 19 Decline in durable-goods consumption ............................................................ 20 Lowerinflation ................................................................................................. 20 Further recovery of the household saving rate .................................................. 20

Good performance of manufactured-products trade ................................. 23 Stabilized merchandise trade deficit ................................................................. 24 Expanding trade with the EEC .......................................................................... 24 Positive demand trends, tempered by competitiveness fosses .......................... 26 Stabilization of market share ............................................................................ 26

Sharp contraction of trade in services ................................................ 26 Further acceleration in the growth of capital flows ................................. 28 Rise in new investment instruments and growth of short-terni securities issues...... 30

Clearcut success for the Plan d'Epargne Populaire and mutual funds .............. 30 Sluggish financial market ................................................................................. 30 Slower growth in loans to households .............................................................. 31

Credit institutions exposed to keen competition and a higher cost of funds ........... 31 Stabilization of the rate of compulsory levies, while public spending outpacesGDP ........................................................................... 32

Further reduction in the budget deficit .............................................................. 33 Higher social security contribution rates offset by a fall in the taxation rate ............ 33

The international setting ................................................................................... 35


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OVERVIEW French growth slowed sharply in 1990: gross domestic product (GDP) rose 2.6% in real terras compared with 3.7% in 1989 and 4% in 1988. Meanwhile, market GDP also rose 2.6% versus 4.3% in both preceding years.

Most OECD countries were also affected by the slowdown. The economies of France's major partners grew approximately 2.7% in 19901 after 3.3% in 1989. The United States and Britain registered a growth rate of less than 1%, while Japan and Germany continued on an expansion course. The European Econornic Community as a whole recorded a slowdown similar to the one observed in France.

The Gulf crisis had a limited impact. The rise in energy prices remained very modest, giving at most a slight momentum to the slowdown already under way.

Productive investment is still the engine of French growth. Households allocated most of their real income gain to saving rather than consumption, which rose very moderately. But the saving/investment imbalance was aggravated by the downturn in corporate profits, higher expenses, and increased general government consumption.

After an outstanding performance in 1989, French export growth declined significantly. While Foreign demand—in particular from Germany—decelerated more slowly than world trade, the francs appreciation against the dollar weighed on French price competitiveness. The export-to-import ratio for manufactured goods stopped falling for the first time since 1984, thanks to the favorable movement in the terras of trade. By contrast, service exports slackened, and the rise in the tourism surplus was weak compared with the French Revolution Bicentenary year of 1989. The export-to-import ratio in nominal terms for goods and services became negative for the first time in six years.

Domestic demand expanded moderately. Household consumption continued on its upward course of the preceding years, but there was Little increase in purchases of consumer durables, notably automobiles.

Investment growth weakened. Household residential purchases sagged, the pace of general government investment eased slightly, and the growth rate of investment by non-financial enterprises fell by nearly half. A contrast, however, was visible between the manufacturing industry, where firms are still replacing their capital goods, and the construction and service industries, where outlays on capital goods are falling sharply.

1. French finance minnisdy forecasting office esti,nates, February 1991.


Tighter stock (inventory) management, particularly by retailers, amplified the downturn in domestic demand.

Employment scored new gains in 1990. The slowdown in production activity had little effect: 250,000 jobs were created, or barely less than in the cyclical upswing of 1989. The decline in short-terra employment persisted, especially in the manufacturing industry, and there was only a very slight decrease at year-end in the Humber of hours worked. Because of this slow adjustment in the employment level to the production downturn, productivity gains for 1990 were the weakest in a decade.

Unemployment, however, fell more slowly, for the number of people entering the labor market rose faster than the number of hirings.

Households' share of national income, which had been falling since 1983, climbed back in 1990. Gross wages and salaries rose faster than in 1989, when the rate of social security contributions also increased. Higher pension and unemployment benefits accounted for a continued brisk growth in overall social benefits. Property income was buoyed by high interest rates and by the growth in saving.

The real disposable income of households posted an increase of 3.3% in 1990, virtually the same rate as the 3.2% of 1989. This result was obtained through a slight deceleration in prices: the final consumption price moved up 3.3% in 1990 compared with 3.6% in 1989.

The increase in the volume of service purchases was accompanied by an acceleration in service prices that contrasted with the general disinflation movement. Indeed, France achieved an outstanding inflation performance in 1990: the consumer price rise eased despite the disturbances affecting energy prices. This moderation contrasts with the resurgent inflation recorded in most partner countries. Only Germany experienced a similar pattern, and the French-German inflation differential held steady.

Corporate profits shrank. Operating margins were squeezed by heavier payroll expenses, resulting from a large increase in nominal wages coupled with further growth in employment levels. The increase in financial expenses, linked to high interest rates and a three-year pattern of rising indebtedness, weighed on the saving rate. The self-financing ratio declined further.

The fall in saving also affected general government owing to the strong growth in its purchases of goods and services as well as in social benefits. Despite the significant recovery of the household saving rate, domestic saving grew more slowly than national investment. The saving/investment imbalance widened sharply after five rather favorable years.

Monetary and financial developments were characterized by slack markets, high interest rates and sharp exchange-rate swings. The firmness of the franc and a restrictive monetary policy promoted a reduction in the French-German interest-rate differential. The confidence of foreign market participants in the francs stability accelerated the internationalization of French public debt. High real


yields attracted deposits and investments by non-residents. Despite the steady

progress of French direct investment abroad, the balance of interest and dividend

payments between residents and non-residents widened unfavorably for France

and weighed on the nations net borrowing.

Sharp fallback in the growth rate

After two years of robust growth, the French economy visibly slowed in 1990.

Market gross domestic product (GDP) gained 2.6%, or 1.7 points less than in

1988-89. Total GDP registered an identical increase. This slowdown, first

observed in the second half of 1989, lasted into 1990 except for a slight recovery

in the third quarter.

The downturn affected the entire economy. The output of market branches rose

3.9% compared with 5.7% in 1989. Only agrifoods were more dynamic in 1990

than 1989. Manufacturing—particularly intermediate goods and transportation

equipment—was the hardest hit, expanding only 1.7% after 5.2% in 1989.

Although it also contracted, the services sector maintained a brisk growth rate,

with the slowdown mainly affecting non-financial business services.

The share of manufacturing in the growth of value added shrank correspondingly

(chart p). Wholesale/retail trade and non-financial services again made the

largest contribution.

The growth rate of final con~umption has remained stable at about 3% since

1987, indicating a certain inertia in the face of the fluctuations in economic

activity. In the slowdown, final consumption resumed its yole as the fastest-

expanding element of growth, contributing two points to market GDP (chart p).

Contribution of major branches to growth in value addedl

1987 1988 /989 /990

I. In real terras at previous years prices LII Manufacturing

M Construction, civil engineering and rural engineering

Source: Comptes de la Nation 1990, Insee M Wholesale and retail trader non-financial services


O Contribution to market GDP growthl

-2

-3

I. In real terms al previous year's prices /989 Source: Comptes de la Nation 1990, Insee ® 1990

Employment: continued buoyancy The mid-1989 slowdown in production activity had little effect on jobs in 1990. Employment increased even in the hardest-hit branches of manufacturing. Job creations totaled 250,000, barely less than in 1989, when the number of people at work rose by 270,000 (table 0). Labor productivity gains were particularly weak in 1990.

Although typical, this lag between the production cycle and the employment cycle was surprising in its size. Two factors may account for this. First, corporate executives, underestimating the scope and persistence of the economic slowdown, may have failed to conduct a thorough review of their previous hiring commitments. Second, even at the start of 1990, the pressures on productive capacity remained very strong. In particular, firms were making intensive use of the labor factor and had difficulty finding new staff. The production slump eased these pressures without significantly affecting employment.

The number of hours worked effectively decreased, especially in the last quarter. Overtime was reduced, and firms resorted increasingly to part-time unemployment. The sharpest falls appear to have occurred in the automobile industry, rubber/plastics, textile/clothing and mechanical engineering.

Non-market services are the only services where employment levels probably rose much faster than in 1989. This acceleration appears to be due to the rapid-increase in "employment-solidarity contracta" (CESs) which offset the decline in "community-service employment schemes" (TUCs) observed in 1988 and 1989. In the civil service and the non-profit associations sector, job creations remained steady.


annual change over Numbers at work at

year earlier Dec. 31, 1991 (thousands)

1987 1988 1989 1990 WAGE AND SALARY EARNERS + 0.7 + 1.4 + 1.7 + 1.5 18,920 • Agriculture - 1.4 -0.4 - 1.0 - 0.8 262 • Industry - 2.4 - 0.5 + 0.9 + 0.3 4,669

Agrifoods - 0.8 - 0.3 - 0.2 0 527 Energy -2.2 -2.6 -2.2 -2.9 259 Manufacturing - 2.7 - 0.4 + 1.3 + 0.6 3,883

of which: üuerntediate gonds - 1.6 + 0.4 + 2.1 + 0.7 1,241 Producer durables - 3.4 - 0.8 + 1.5 + 1.0 1,517 Consumer durables - 2.8 - 0.6 + 0.3 0 1,126

• Construction, civil engineering and rural engineering + 1.2 + 2.8 + 1.7 + 1.8 1,278

• Market services + 2.7 + 3.0 + 3.0 + 2.3 8,396 Wholesale and rctail trade + 1.7 + 1.6 + 1.7 + 1.4 2,138 Transportation and communications + 0.6 + 0.4 + 1.2 + 0.7 1,345 Other market services + 4.6 + 3.4 + 4.9 + 3.6 4,247 of which: Business services + 9.7 + 11.6 + 9.4 + 5.9 1,400

Evcluding te nporarv jobs + 6.4 + 7.2 + 7.1 + 8.0 1,164 Tenporary jobs + 37.8 + 40.3 + 20.7 - 3.2 236

Financial services + 0.3 - 0.4 - 0.5 0 667

• Non-market services + (1.4 + 0.4 + 0.3 + 1.5 4,315

NON-WAGE AND NON- SALARIED EMPLOYMENT - 0.7 - 1.0 - 1.5 - 1.3 3,149 • Agriculture - 4.2 -43 - 4.2 - 4.2 1,039 • Non-agricultural sectors + 1.5 + 0.9 0 + 0.1 2,134

TOTAL EMPLOYMENT + 0.4 + 1.1 + 1.2 + 1.1 22,069

Wage and salary earners in non-agricultural private sector + 0.8 + 1.8 + 2.2 + 1.6 14,344

1. Temporary workers are included in "Business services" and not in the sectors where they are actually employed-typically the construction industry, civil engineering, rural engineering, and intermediate-goods and producer-durables industries. As a result, changes in employment levels are underestimated in manufacturing and the construction industry, and overestimated in services.

Source: Division Emploi, 1990, Insee

Q Employrnent by branch e

Decline in short-term employment

The trend toward greater stability in new jobs, which emerged in 1989, gathered pace in 1990. The number of open-ended employment contracts rose slightly more rapidly than in 1989 in the non-agricultural market sectors, with an increase of 305,000 versus 280,000. Short-term employment fell for the first time rince 1983. Firms have given priority to further hirings for long-term jobs, particularly in manufacturing and in the market services sector, while adjusting to lower demand by reducing short-terni job contracts. Overall, the rate of short-term

1990 NATIONAL ACCOUNTS il

employment moved down from 6.5% of total employment at year-end 1989 to 5.8% at year-end 1990 (chart @).

However, the rapid fall in unemployment observed in 1988 and 1989 slowed in 1990 (chart 0). The jobless rate, which stood at 9.0% at year-end 1990, declined by only 0.1 points during the year, versus 0.6 points in 1989.2 The number of job-seekers registered with the National Employment Agency rose by 25,000, compared with a fall of 60,000 in 1989. The increase was concentrated in the last four months of 1990.

This phenomenon is probably compounded by two factors: first, the trend increase in the population old enough to be gainfully employed (approximately 160,000 more people in this category at year-end 1990); second, the arrival on the job market of about 10,000 recipients of the guaranteed minimum income (RMI) and of roughly 20,000 immigrants. But two other factors exert an opposite influence: the rising rate of school enrolment among 16-to-21-year-olds, and the

® Short-term employment as 8 a share of total employment' short-term

employment

6

Fixed-terra contracts

4 .... ....... .. .... .. ....

2 Temporary contracts

Training prograins _ _ - _ _ _ - — for Grst-time workers

1986 1987 1988 I 1989 1990

I. In non-agricultural market sectors


2. The unemployment level as defined by the International Labor Organisation (ILO) and observed in the March 1991 unemployment survey cou Id enta il a downward revision of the jobless rate if, as in the four preceding years, the change in unemployment measured according to international recommendations proves more favorable than the "month-end number of job-seekers" gauge used in the French national statistics.


% Q ILO-defined 35 unemployment

rate

30 Wornen trader 25

25

20

Men uncler 25 15

Total Women aged 2549

V ------------ --_/0 --''' Women ugecl 50 and over ........... .

................. . .... .........................

Men agcd 25-49

5 Men aged 50 and over

/985 1986 /987 /988 1989 1990


dip in the trend growth of the adult female participation rate.- From 1985 to 1989, the working population of metropolitan France has increased by an average of at least 85,000 a year.

In 1990, the programs to facilitate the employment of young people and the long-term jobless expanded, keeping several tens of thousands of people off the unemployment rolls. The new measures introduced by the second "employment plan" achieved satisfactory gains, while twice as many trainees were receiving personalized "training-credit" at year-end 1990 than twelve months earlier. Four hundred thousand housellolds were being paid the "guaranteed minimum income" social benefit at year-end 1990. Although one of the eligibility conditions is a commitment to seek employment or retraining, fewer than 40% of the recipients had met that requirement.

3. The participation rate of a population categorv is the ratio of (a) the working population (people in ernployment + unenyploved) in the category to (h) the total population of the category.


Year-end hait in the unemployment fall The year-end resurgence of unemployment particularly affected young people seeking their first jobs. While the youth unemployment rate registered a further decline of 0.8 points in 1990, it remained well above the average. The jobless rate rose again for adults aged 25 to 49, especially among men: this development is related to the employment slump in the manufacturing industry. Despite a favorable economic cycle and an active govermnent policy, no true improvement has been achieved in long-term unemployment. Moreover, a growing proportion of discouraged unemployed have given up their search for jobs.

Sharp increase in job-seekers among the most highly qualified categories While blue-collar unemployment continues to fall, the white-collar jobless rate is rising. The largest drops were recorded among the least qualified workers: -11.2% for unskilled workers and -4.1% for serai-skilled workers. By contrast, unemployment among managers, technicians and supervisory staff registered increases ranging from 12 to 15%.

Fixed capital formation in the manufacturing industry kept constant through heavier indebtedness Continued investment in capital goods

Gross fixed capital formation by firms remained the most buoyant composent of dornestic demand. The investment rate of private enterprises leveled off after a five-year climb (chart p). That of unincorporated cnterprises and large public-sector firms rose. But productive investment seems to have slowed in the building and construction industry, civil and rural engineering, services, and wholesale/retail trade.

In manufacturing, the 1986 business recovery put sharp pressures on productive capacity, causing capacity-linked investment to outpace modernization-linked investment. In 1990, capacity utilization rates remained high, and the share of capacity-linked investment did not decline until the end of the year. Although short-terne demand is slackening, manufacturera stil) need to replace and modernize their plant and equipment.

Corporate operating margins narrowed by the rise in real wages After seven years expansion, the operating margin of private enterprises fell to 30.9% in 1990 from 31.7% in 1989 (chart Q).

The share of wages in value added rose, alter declining by an average 2% a year since 1982. From 1982 to 1985, and again in 1988-89, this movement was largely due to the fact that real wages grew more slowly than hourly labor productivity


32

28

24

0 Operating margin (profit margin)i

® Investment ratel

22

20

18

16

/4

1. Ratio of gross fixed capital formation to value added. Corporate and quasi-corporate enterprises, excluding large public-sector tirets.

Source: Comptes de la Nation 1990, Insee

70 75 80 85 89 90

I. Ratio of gross operating surplus to value added. Corporate and quasi-corporate enterprises, excluding large public-sector firms.


gains (chart €). In 1990, that share rose 1.4%, mainly owing to a 2.9% increase in real wages, whereas hourly labor productivity gained only 0.2%. The 1990 rise in real wages was only partly offset by the 1.3% increase in the relative price of intermediate consumption.

4. Wages are deflated hy producers' prices. Real wages are measured in terms of proctucers' total payroll colts.


Q Breakdown of Logarithm changes in wage /04 share of value added'

/00 Logarithm of nominal operating margin

96 Logaritlun of real wage (adjusted for change in hourly productivity)

8b' Lugarithm of wage share of velue added

80 85 89 90 I . Corporate and quasi-corporate enterprises, exeluding large public-sector l'irms

Saving rate depressed by surge in finance charges The saving rate of private enterprises fell 1.3 points to 15.4% (chart p). The increase in finance charges (interest + dividends), already observed in 1989, was amplified in 1990.

Between 1982 and 1988, falling operating margins and rising real interest rates protnpted businesses to pay off their debts. The return to growth led them back to financing their investments by borrowing. For this purpose, they relied heavily on the financial markets. Dividends paid rose from 4.5% of value added in 1982 to 6.5% in 1989 and 7.1% in 1990. The total finance charge in 1990 reached 16.2% of value added, or 1.6 points more than in 1989. Part of the burden was offset by the equally steady rise in financial income. This reflects the growth in securities purchases—particularly intense in the past five years—linked to the external growth of firms and to their increasingly active management of liquid assets. Net corporate finance charges reached 10.3% of value added in 1990, up 0.8 points for the second consecutive year.

This rise must, however, be viewed in a proper perspective. In terms of the gross operating surplus, of which it represents about one-third, it remained in 1990 at a level comparable to that of the early 1970s. On the other hand, the development worth emphasizing is the growth in dividends paid and received compared with interest"—a trend fueled by the expansion of market financing, that is, disintermediated financing."


© Gross corporate saving rate] /s

/6

14

12

10

70 75 80 85 89 90 L Ratio of gross saving to value added.

Corporate and quasi-corporate enterprises, excluding large public-sector fions. Source: Comptes de la Nation 1990, Insee

Greater use of bank credit The corporate self-financing ratio, which has been falling since 1987, stayed above 80% in 1990 (chart p). As a proportion of value added, investment rose by only one point between 1988 and 1990. On the other band, equity purchases5 climbed sharply (table Q). Since 1989, banks have once again been providing most of the funds needed to compensate the saving shortage.

A mixed year for large public-sectorfirnis Thanks to tighter cost controls at Electricité de France-Gaz de France (EDF-GDF), the large public-sector firms in the energy sector recorded an increase in their value added.

A nominal growth of 9.7% in total investment increased the net borrowing of the transportation sector and reduced the net lending of the energy sector. The transportation sector suffered from the sharp downturn in traffic at year-end. The nominal value added of the state railroads (SNCF) was nearly unchanged, white that of Air France fell by over 10%. Investment continued, in particular on the SNCF's top priority program for the high-speed train (TGV), on heavy-infrastructure renovation by the Paris municipal transportation authority (RATP), and on Air France's accelerated fleet modernization program.

5. Excluding purchases of',nutual-fond shares, which have been recorded here under liquid assets.


O Self-financing % ratio* 110 -

100

90

Self-financing ratio Self-financing ratio in the broad sensc2

80 in the strict senne

70

60 ti / E E' o' 70 75 80 85 89 90

* Corporate and quasi-corporate enterprises, excluding large public-sector firms. I. Ratio of gross saving to gross fixed capital formation. 2. Ratio of (gross saving + capital transfers) to (gross fixed capital formation + change in stocks

+ purchases of land and intangible assets). 3. Self-financing ratio in the broad sense + equity purchases in the denominator.


e Private firms' sources and applications of fundsl

% of value added

1985 1988 1989 1990

Sources

Working-capital requirement 2 0.0 7.6 6.0 3.8 Investment3 15.6 18.3 19.3 19.3 Equity purchases 1.1 4.8 6.1 8.1 Liquid assets and investments 2.4 2.5 6.2 4.0 Balancing item - 0.4 1.0 - 0.1 0.7

Applications

Gross saving 11.2 17.3 16.6 15.4 Net capital transfers 0.5 0.6 0.9 1.0 Equity issues 4.4 5.8 8.0 6.8 Long and medium-terra debt 1.6 5.3 7.6 7.2 Short-terni debt 0.9 4.7 4.4 5.9 Negotiable debt 0.0 0.4 0.0 - 0.4

1. Corporate and quasi-corporate enterprises. excluding large public-sector firms. 2. Change in stocks and commercial loans. 3. Gross fixed capital formation and net purchases of land and intangible assets.



70 75 80 85 89 90

74

72

70

68

® Gross household disposable income as share of GDP

France Télécom scored a sharp nominal increase in revenues after years of outwardly poor performance owing to the introduction of VAT on telecommunieations services in 1987-88.

Household income unaffected by slower growth

Real household income grew 3.3% in 1990, or by virtually the saine percentage as in 1989 (3.2%). This performance was due to a slight deceleration in prices, with the final consomption price rising 3.3% in 1990 after 3.6% in 1989.

Households share of national income had been falling since 1983. The movement slackened in 1989 and reversed itself in 1990. The economic slowdown had no repercussion on the income curve (chart m).

Unlike in 1989, the rate of social security contributions did not increase in 1990. Real gross wages grew at the saure pace as total disposable income (table ©). Higher pension and unemployment benefits accounted for a continued brisk growth in overall social benefits.

In contrast to rent received, which continued to rise, unincorporated enterprise income registered very weak gains. Property income was buoyed by high interest rates and by the expansion of saving. It rose slightly less briskly than in 1989, but accounted for nearly one-third of total-income growth. The increase in income and wealth taxes—slightly greater than that of total disposable income—gained momentum.



% growth rate A Real household

disposable income: main componentsl

1986 1987 1988 1989 1990

1990 n v alue

value (FFbn)

Cross wages and salaries (a) 2.0 0.7 2.6 2.9 3.4 2,435 Social security contributions actually paid ont (h) 5.7 6.8 5. I 7.8 5.1 423 Net wages and salaries ((a) - (b)) 1.4 -0.3 2.1 2.0 3.1 2,012 Social bcncfus reccived 4.2 0.4 3.8 2.3 3.4 1,502 Income and wealth taxes 3.6 1.3 -1.9 2.2 3.6 397 Property incomet -2,2 4.4 6.0 12.0 9.0 468 Gross operating surplus 5.1 0.8 2.6 5.4 2.2 1,147 Gross disposable income 2.4 0.4 3.8 3.2 3.4 4,424

I. The dellator applied is Lite consumer price usine Lite previous year's consomption structure. 2. Dividends + interest+ land incarne + profit-sharing.

Source: Comptes de la Nation 199)), Insec

Decline in durable-goods consumption Total consumption growth dipped to 2.9% from 3.0% in 1989, while its share of GDP rose slightly (chart m). The slowdown was clearly limited to durable goods, which grew only 2.2% in real terms versus over 5% in 1986-89 (table p). The year 1990 marks the end of the automobile-purchasing cycle begun in 1986, a year of brisk recovery in real income.

Lower inflation Consumer price growth recorded a further slowdown in 1990, with an annual average increase of 3.4% versus 3.6% the previous year. Private services were the only items to experience an acceleration. Health care, rent and public services registered smaller increases than in 1989. The easing in food-price growth resulted from a downturn in agricultural producers' prices, in particular for meat.

Further recovery of the household saving rate The saving rate climbed to 12.0% in 1990 from 11.6% in 1989, accelerating the recovery begun in 1987. By contrast, residential investment slackened, with 310,000 housing starts in 1987, 327,000 in 1988, 330,000 in 1989 and only 309,000 in 1990 (chart @).

Household financial saving was stimulated by the introduction of new tax-sheltered investment plans at the end of 1989 (Plans d'Epargne Populaire or PEPs), high real interest rates, increased liquidity due to the cutback in durable-goods purchases, and a more restrictive credit supply policy (chart p). The conventional liquid savings instruments, long managed by the savings banks, are coming under competition from PEPs and money-market mutual funds. As a result, the liquidity/income ratio fell even more sharply in 1990. The investment/income ratio declined from its 1989 level, as the vibrant expansion in mutual funds did not offset the downturn in bond holdings. The growth in the


62

60

58

Household consumption as share of GDP


%growtlt rate

1985 1986 1987 1988 1989 199(1

Total major durables of which: 0.2 9.0 6.7 6.4 5.1 2.2 Automobiles 0.3 10.9 9.2 4.9 6.6 0.8 Television sets 2.4 18.0 6.0 7.0 -1.5 5.0 Refrigerators and freezers -6.0 4.6 6.0 9.7 4.1 9.2 Washing machines 9.5 7.5 14.5 8.0 4.0 0.5 Furniture -3.2 3.6 0.7 3.0 2.9 0.7 Other major durables 2.9 9.7 7.4 13.1 5.7 6.0 Total semidurables of which: -0.5 2.0 0.6 1.4 2.0 1.9 Textiles and leather -0.2 2.1 -1.2 -0.6 0.4 1.5 Other semidurables -0.9 (.9 2.6 3.5 3.7 2.3 Total nondurables of which: 2.5 2.6 2.1 2.3 2.6 2.3 Nondurables other (han food 3.9 3.3 2.4 2.3 3.8 3.0 Food including animal products 1.2 (.9 (.9 2.2 1.7 1.7 Total services of which: 3.6 4.5 3.2 3.9 3.2 3.9 Housing 2 4.2 4.0 4. I 3.9 3.9 3.9 Medical and health services including veterinary medicine 6.2 7.1 2.2 5.6 6.9 7.6 Public transportation. post and telecommmnicationsa 3.3 (.5 4.3 4.8 4.5 2.7 Hotcl. restaurant. institutional food and accommodation services 2.1 (.9 0.5 3.1 4.3 2.1 Other services 2.5 6.7 4.1 3.3 -0.8 3.3

Total national consomption including non-market gonds and services 2.3 3.7 2.7 3.2 3.0 2.9

I. The deflator applied is the consumer price using the previous year's consumption structure. 2. lncludes heating and lighting expcnditures.


Q Household consumption by product category I

(990 NATIONAL ACCOUNTS 21

Q Household saving rate

22

2/

20

19

18

17

Total saving rate

/4

/3

/2

11

16

14

/2

10

8

6

4

Residential investment rate'

70 75 80 85 89 90

I. Household residential investment: gross fixed capital formation of households minus that of unincorporated enterprises



i 14

12

10

$

6

4

2

4 -

2 -

0 -

10 —

® Household saving rate components

Investments/incorne

8

/ \J\J Loans/income

4 70 75 80 85 89 90


financial saving rate is ultimately a consequence of the fall in credit. The credit/income ratio is now lower than its average level of the past twenty years, and the effects of the end-1986 deregulation—which drove borrowing to a peak in 1987—have faded away.

Good performance of manufactured-products trade In 1989, global trade expanded three times as fast as the GDP of the main industrial economies. In 1990, its growth rate fell to less than twice that measure. The rise in world demand for French output, weighted by French market share, remained stronger than global trade growth. France benefited from buoyant German imports, while the geographic specialization of French exports gave the country a relative protection against the U.S. recession.


Nevertheless, the balance of trade in goods and services posted a deficit of FF2 billion (table ©). While the manufacturing trade balance stabilized, exports of services shrank in response to the world slowdown. The current-account deficit climbed from FF27 billion in 1989 to FF42 billion in 1990.

Stabilized merchandise trade deficit The nominal growth in merchandise trade was a sluggish 3% in 1990, compared with 15% in 1989. The FOB-FOB deficit rose FF6.2 billion. But, for the first time rince 1984, the balance of trade in manufactured goods recorded virtually no decline (table p). After its record high in 1989, the total agrifoods surplus scored a further gain in 1990, provided by processed products and food products. Trade in primary agri-cultural products gradually shrank during 1990 as a result of the sharp fall in world prices. The near-stability of the manufacturing trade balance stems from the slight increase of FF2.1 billion in the civilian manufacturing deficit, partly offset by a marginal rise of FF1 billion in the military equipment surplus. The balance of trade in producer durables suffered from the deferral of Airbus sales due to the autumn 1989 strike at British Aerospace. Excluding Airbus, the deficit would have narrowed instead of rising FF5.3 billion. The automobile surplus rose by less than FF2 billion in 1990 despite the outstanding 46% increase in French exports to Germany. The consumer nondurables deficit widened significantly, while the consumer durables deficit posted a modest reduction as in 1988 and 1989. The low oil price at the start of 1990, coupled with the dollars fallback, partly offset the impact in francs of the oil-price rise later in the year. Overall, the cost of imported oil rose an average 9% in 1990. The increase in the energy deficit remained moderate, bearing no comparison to the earlier oil shocks of 1973 and 1979-80.

Expanding trade with the EEC France reduced its trade deficit with the EEC at the same time as its deficit with Germany, contributing to the improvement in the French balance of trade with the OECD as a whole (table @). Excluding the EEC, however, France's trade with the OECD posted a deficit of nearly FFI l billion. The bilateral deficit with the U.S. was aggravated by the loss of French price competitiveness due to the falling dollar. The problems of planned economies in their transition to a market system were reflected in a sharp drop in French exports, widening the deficit with that zone by FF9 billion in 1990.

12F/,ii (encrent) ® Balance of trade

in goods and services

1986 1987 1988 1989 1990

Goods' -34 -66 -7! -93 -99 Services 86 73 75 103 97

Total 52 7 4 10 -2

I. CIF-FOB balance: includes skip and aircraft fading, excludes miscellaneous.



FFbn (curreni)

1988 1989 1990

Agricultural and food products 39.3 48.2 51.0

of which: Agricultural producls 30.2 34.1 34.5 Agrifoods industry products 9.1 14.1 16.5

Energy - 66.6 - 83.3 -93.0

Manufactured gonds' - 42.0 - 55.9 - 57.1

of which: Intermediate goods - 22.3 - 38.6 - 40.3 Pioducer durables - 24.6 - 19.2 - 24.8 Land transportation cquipmcnt 23.8 17.3 25.2 of which:

Autunmbiles and spare porcs 8.1 3.8 5.6

Consumer durables - 16.4 - 15.6 - 14.1 Consumer nondurablcs - 27.2 - 27.3 - 31.6 Military equipment 24.4 27.2 28.3

CIF-FOB balance2 - 65.4 - 87.0 - 96.3 FOB-FOB balance 2 - 32.8 - 44.3 - 49.5

I. Includes tnilitary eyuipment; excludes miscellaneous and ship and aircraft fueling. 2. Includes miscellaneous; excludes ship and aircraft fueling.

Source: French customs, 1990

FFbn

1988 1989 1990

EEC -43 -55 -411 of which:

Marw/dcrrrring -83 -101 -82

OECI) excluding EEC -39 -55 -65 of which:

MamrJncrurin•t -36 -50 -64

OPEC -3 -9 -11 of which:

Mmnr/irruu'ing +2-? +30 +33

Developing countries +5 +13 +8 excluding OPEC of which:

Marurfacnrring +25 +33 +3)

Countries with planned economies2 -11 -8 -17 of which:

Manufacmring +3 +4 -3

I. CIF-FOB balance, excludes military equipment. 2. Albania, Bulgaria, China, Cuba, Czechoslovakia, East Germany, Hungary, Kampuchea, Laos, Mongolia, North Korca, Poland, Romania, USSR, Vietnam.

Source: French customs, 1990

0 Balance of merchandise trade

Q French trade balance by broad geographic areal

fi+iIll~/r Y[YLIJ/I•[KKt1Y1►YY•i~~7

Positive demand trends, tempered by competitiveness losses The virtual stability of the manufacturing deficit results from the limited growth of trade flows—up 4.1% in nominal terms—and the positive change in the terms of trade. The franc appreciated by more than 6% against the currencies of France's major competitors, reducing the value of French imports by 2.8%. Meanwhile, by tightening their margins, exporters contributed to the 1.6% reduction in export prices. The geographic segmentation of French exports has become more favorable since 1989. German expansion is stimulating France s exports, making up for the slow down in the English-speaking countries. World demand for French products, weighted by market share, was among the highest in the OECD in 1990 as in 1989 (table Q).

Stabilization of market share In the face of these rather positive trends in demand, France's export performance seems undistinguished (chart 4m). Unlike in 1989, manufacturing export volume did flot expand enough to meet the full increase in foreign demand. The rising franc and higher unit labor costs diminished the competitiveness of French products.

Sharp contraction of trade in services The further improvement in the tourism balance was inadequate to make up for the slump in market services exports, and even less for the very sharp worsening of the balance on distributive transactions (table O).

% real growth © World demand

for manufactured goods weighted by market share of France and other countries

1989 1990

World demand for goods manufactured by: France 9.3 7.2 United States 9.2 5.2 Japan 8.0 4.2 former West Germany 8.5 5.6 Britain 8.7 7.3 Italy 8.9 7.1 OECD 8.8 6.0

Source: Direction de la Prévision (French finance ministry forecasting office), 1990 FFbn

© Balance of trade in invisibles 1988 1989 1990

Effective trade in services 22 31 22 of which:

Business services 30 34 28 Tourism 23 39 41 Distributive transactions (transfer payments, interest, profits and dividends) - 20 - 35 - 63

Total invisibles 25 35 0

Source: Direction de la Prévision (French finance ministy forecasting office), 1990


% real growth

10

8

6

4

2

0

-2

-4

® Export performance ant competitivenessl

Parity-acljusted indexes, 1979= 100 //0

108

106

104

102

100

98

96

9-!

World demand weighled hy French market share Exports of manufacturcd goods

S6 i7 88 89 90 86 87 88 89 90

I. Price competitiveness relative to Fronces seven main partners: Germany, Belgium, Japon, Luxembourg, Netherlands, Britain, U.S.

Source: Direction (le la Piévision(French ministry forecasting office), 1990


Tourism posted a FF41-billion surplus in 1990, up FF2 billion on 1989. This gain is ail the more noteworthy given the circumstances—the French Revolution Bicentenary celebrations—that made 1989 an exceptional year. These results were achieved despite the francs appreciation and the year-end slump in global travel and tourism brought about by the threat of war. France strengthened its competitive position in Europe.

Market services trade posted a sizable decline. Exports stagnated owing to the world economic slowdown, while imports swelled because of the French contribution to certain European technological programs.

The FF28-billion deterioration on the distributive transactions account is partly explained by the large increase in interest and dividends paid to the rest of the world—a consequence of the rapid growth in non-resident holdings of franc-denominated short-term securities and assets. The losses arising from the sovereign debt cancellations decided on at the Dakar and Toronto summits represented an extraordinary outflow of FF23 billion booked to the distributive transactions account.

Further acceleration in the growth of capital flows Despite a new increase in net long-term capital inflows, the basic balance worsened owing to the deterioration in the current account and the inclusion of debt cancellations (table m).

The deficit in the government and government-guaranteed lending sector continued to weigh on the French balance of payments. The gap is due to the pursuit of development aid policy, the consolidation of developing-country debt, and the settlement by the French export credit insurance agency (COFACE) of claims on guaranteed trade credits. Bank sector loans reflect the growth of intercompany transactions within large financial groups.

The net balance of direct investment swung into further deficit owing to a surge in French investment abroad. This trend concerned the manufacturing and energy industries—where certain transactions reached high unit values (Rhône-Poulenc, LVMH Moët Hennessy Louis Vuitton, Compagnie Française des Pétroles (CFP))—as well as the banking and insurance sectors. The lifting of the last remaining regulatory constraints on cross-border investment, together with the relatively low degree of concentration in the services sector, is prompting many French companies to prepare for the arrivai of the single European market. The large public-sector firms are increasingly involved in such moves.

Purchases of French securities by non-residents reached a new peak. Foreign investors focused on government securities. After the massive purchases of fungible bonds (Obligations Assimilables du Trésor or OATs), Treasury bills with maturities of more than one year were particularly sought alter in 1990. The


FFbn

1989 1990'

I. Current transactions2 -27 -42 II. Capital transfers3 -6 -27

III. Long-term capital flows 55 60

of which: Connnercial credits 8 10 Loans - 40 - 1 Securities transactions 143 153 of which:

Foreign - 42 - 43 French 185 196

Direct invesanenta - 57 - 102 of which: Private sector and batiks - 54 - 99 of which:

French investmeu abroad - 1/5 - 141 Foreign investnient in France 61 42

Public sector - 3 - 3

IV. Basic balance (I + II + III) 22 - 9

V. Short-term capital flows and balancing item -86 - 80

VI. Total balance (IV + V) -64 - 90 VII. Change in external

monetary position 64 90 of which:

Banks 37 150 Public sector 27 - 60

1. Provisional figures. 2. The balance of payments records the economic and financial flows between residents and nonresidents. Its scope differs front that of the national accounts, as it includes both metropolitan France and its overseas départements and territories. 3. Debt cancellations, which are booked as distributive transactions in the national accounts, are recorded under capital transfers in the balance of payments, where their counterparts are included in long-term loans. 4. Direct investments abroad include startups of enterprises or establishments, acquisitions of equity stakes of ut least 20%,, and parent-company bans to subsidiaries. They exclude profits reinvested by overseas subsidiaries or branches.

Source: French treasury, 1990

® Balance of payments

persistence and extension of the phenomenon were due to the diversification of U.S.and Japanese investors international portfolios. Overseas confidence in French government paper was boosted by the francs stability and the real interest rate spread, which remained positive for France. While the inflow of Foreign funds offset the deficit on the current account and the direct investment account, short-terni capital movements were marked by wide swings. French net assets abroad expanded sharply after the abolition of controls on capital movelnents. The worsening of the monetary position masks a FF60-billion increase in official foreign-exchange reserves and net inflows of FF150 billion in short-term bank capital.


Rise in new investment instruments and growth of short-term securities issues

Clearcut success for the Plan d'Epargne Populaire and mutual funds

Nineteen-ninety was marked by the early success of the tax-sheltered saving plan called Plan d'Epargne Populaire (PEP), the effects of the late-1989 legislation allowing mutual funds to shift to a capitalization (dividend reinvestment) structure, and cuts in taxes on life-insurance policier. Launched at the start of 1990, the PEP achieved growth in excess of the most optimistic forecasts, with FF105 billion outstanding by year-end. One reason for its success is the product's intrinsic characteristics: simplicity, absence of capital risk, relatively high returns, and the premium offered to low-income investors. Another factor has been an intensive promotion campaign. Financial institutions have seen the PEP as a means of gaining greater long-term control over the volume and cost of funds. The creation of capitalized mutual funds, first authorized in the fourth quarter of 1989, protects fund shareholders' earnings from taxation. The move gave new momentum to short-term mutual funds, whose new share issues, including capitalized income, more than doubled from 1989. It did not, however, prevent a significant slump in long-terra mutual funds, which were hit by the stock market crisis and the uncertainty over bond yield movements. In 1990, mutual funds played a far greater intermediation role in the liquid-assets market than in the stock and bond markets: their investment in money-market securities expanded massively, while their purchases of equities and bonds contracted. The second major form of collective investment was life-insurance instruments, which recorded a further sharp gain of 19%. In addition to the existing benefits of this type of product—tax-free income and exemption from estate duty—the government abolished the tax on life insurance premiums as of July 1, 1990. Most of the savings channeled into the insurance sector through these vehicles are invested in bonds.

Sluggish financial market

After a very bullish 1989, the securities markets posted a fairly lackluster performance in 1990. New bond issues remained stable on a gross basis at FF327 billion in both years, but dropped in net terms from FF227 billion to FF207 billion. In fact, government and non-financial corporate issues expanded, while those of credit institutions were significantly reduced. After a robust first half, the Gulf crisis sent stock market prices tumbling by over 20% in the second half. New equity issues totaled FF228 billion versus FF247 billion in 1989. This downturn did not, however, affect public offerings, which increased slightly over 1989.


Slower growth in Mans to households

The economic slowdown was accompanied by reduced credit growth. The rate of increase in credit, including funding from the French government and the rest of the world, declined from 11.9% to 11.1%. This slight dip actually corresponds to two significantly différent trends for the two main borrower sectors—businesses and households. Businesses were faced with a severe increase in their borrowing requirement, but found it harder to raise funds from the markets in 1990. They therefore continued to borrow from the banking system at a brisk pace. As in 1989, their outstanding debt rose by about 15%. Short-term credit facilities expanded more than investment credit. In contrast, the growth rate in bans to households, which had already begun to slow in 1988, fell from 9.6% to 7.9% in 1990. This downturn chiefly concerned cash advances to individuals, which have been granted more stringently because of the risk of overindebtedness. Housing bans were affected to a lesser extent, their decline matching that of residential investment.

Credit institutions exposed to keen competition and a higher cost of funds

Amid these developments, credit institutions achieved a relative improvement in their net lending, which is recorded excluding provisions in the national accounts. The upturn was mainly due to the continued brisk growth of billed services and to a slight recovery in loan spreads, the latter movement being linked to a rise of about half a point in the medium level of short-tenu rates over 1989.

Although new lending continued to grow at a robust pace, credit institution results were adversely affected, as in 1989, by two factors: first, a stiff competition for market share; second, an increase in the average cost of funds due to the steady substitution ;n bank liabilities of instruments bearing money-market yields for low-interest-bearing or non-interest-bearing deposits.

The most typical feature of this change is the massive increase of certificate of deposit issues by credit institutions, which totaled FF325 billion in 1990 against FF180 billion in 1989. These instruments are intended to finance new lending and to provide suitable investment vehicles for the many short-term mutual funds managed by the banking system.

Conversely, the financial institutions significantly reduced their new bond issues owing to the bond markets sluggish performance and in the hope of a fall in long-term interest rates.


1987 1988 1989 1990

® Net borrowing/ FI-bn

lending by 150

institutional sector 100

50

-50

-100

-150

Stabilization of the rate of compulsory levies, while public spending outpaces GDP

The fallback in tax revenues and the special cancellation of less developed country debt drove up general government net borrowing, excluding the foreign-exchange stabilization fund (FSC). The government borrowing requirement came to 1.6% of GDP, while compulsory levies remained stable. Central government net borrowing rose as well, reaching FFI21 billion excluding the FSC (table m and chart @ ).

FFbn

General government net borrowing/ lending1

1989 1990

Central government

including FSC' - 105.7 - 125.6 excluding FSC - 103.7 - 121.0

Central government agencies 14.9 11.8 Local government - 9.2 - 9.4 Social-security funds 24.6 15.1

Total general government agencies - 73.2 - 103.5 (excluding FSC)

I. FSC: Fonds de Stabilisation des Changes (foreign-exchange stabilization fund).


Lj Non-financial enterprises • Households • Financial institutions and insurance companies [~ Government M Total France



The public spending/GDP ratio, which fell 0.9 points in 1989, rose 0.6 points in 1990. The increase stemmed mainly from the high level of capital transfers, social benefit transfer payments, and interest payments. Central government intermediate consumption rebounded sharply after its 1989 decline. On the other hand, the 4.9% increase in payroll expenses was comparable to that of 1989. Investment expenditure continued to grow faster than GDP.

Further reduction in the budget deficit

Excluding the FSC, the French central government budget deficit reached FF93.4 billion for 1990, shrinking to 1.4 points of GDP from 1.6 in 1989 and 2.0 in 1988.

As in 1989, because of the deficit reduction and the debt mechanism, interest payments (FF130 billion) greatly outweighed the total deficit, leaving a large "primai y" surplus.

Nevertheless, the ratio of public debt to GDP moved up from 26.4% to 27.6%. This new increase resulted from the persistence of a sizable differential between the effective interest rate on the debt (8.0%) and the nominal growth rate of GDP (5.7%). The self-sustaining debt mechanism, set in motion 1984, is therefore still at work.

Higher social security contribution rates offset by a fall in the taxation rate

The overall rate of compulsory levies held steady in 1990 at 43.8% of GDP. This relative stability reflects two contradictory phenomena. In 1990, the government implemented further cuts in corporate income tax, VAT, and oil-product taxes. This policy, combined with a one-time reduction in levies for the EEC, caused the taxation rate to dip from 24.6% to 24.4% of GDP. On the other hand, as nominal gross wages grew faster than GDP, the rate of social security contributions edged up from 19.2% to 19.4% of GDP—despite the lowering of rates for family-benefits and industrial-accident insurance contributions.

Since 1987, the distribution of compulsory levies between tax levies and social-security contributions has been shifting toward the latter (chart 0).

Net lending by social security funds remained positive for the fourth consecutive year (table ©). Its downturn in 1990 was primarily due to the "régime général," the main health-insurance scheme for wage and salary earners.


Q Taxes and other % ofGDP compulsory levies 46 Social-security contributions

45

44

43

42

4/

Taxes

26

25

24

23

20 Total compulsory Ievies

/9

18

80 8/ 82 83 84 85 86 87 88 89 90

Sou rce: Comptes de la Nation 1990, Insee


FF bn

1987 1988 1989 1990

Social security schentes: 17.1 18.0 30.0 19.2 of which: "General,schetne"(wage and salary earners) - 2.8 - 3.8 - 2.7 - 9.9 Specialfrn ds 0.0 0.2 - 0.1 0.0 Unemployinent compensation schemes 2.8 7.5 14.8 4.4 SClle,nes.çl)eelftc to certain public-nectar items 12.9 8.0 12.8 18.7 Non-wage and nonsalarv earners schenes 5.1 5.5 6.8 6.2 Agricultural-sector sche,ne - 0.9 0.6 - 1.6 - 0.2 Organizations administered by social insurance fonds -7.0 -5.6 -5.4 -4.1 Total social security funds 10.1 12.4 24.6 15.1


® Net lending by social security funds

The international setting

Most OECD countries were also hit by an economic slowdown. The United States and Britain posted a growth rate of less than 1%. Unemployment rose as a result, while inflationary pressures gathered strength in most economies. In 1990, Europe was subjected to conflicting forces that combined to depress economic activity. The swelling of the German budget deficit-linked to the effects of reunification and to personal-tax cuts-had an expansionary effect on western Germany and its partners. This stimulus is estimated to have driven up GDP by approximately half a point. Conversely, the dollars steep decline against European currencies helped to "export" the U.S. slowdown. The economic downturn was particularly visible in southern European countries: in Spain, it was a year-long phenomenoa, while in Italy it was first observed in the second quarter.

This general slowdown was produced by two concurrent developments. The first was the ending of the long expansionary phase in which the industrial economies had been operating since 1982. The second and more specific event was the disturbance created by the Gulf crisis-whose effects were, however, limited. In the biggest industrial countries, the impact on consumer prices of a $5-per-barrel rise in the oil price is estimated at slightly under half a point. In the Anglophone economies, inflation was already accelerating before the rise. In the U.S., the core rate of inflation-that is, stripping out energy and food prices-climbed from 4.3% to 5.1% between January and July 1990. Despite the economic slowdown, the index stayed at 5.2% at year-end, notably on account of the service industries' inertia relative to disinflation (table © ). In Britain, the underlying rate of inflation, which excludes mortgage interest and local taxes ("rates"), also accelerated before the oil-price rise.


Consumer prices in France and other countries

% change on previous year

1988 1989 1990

France 3.1 3.6 3.4

Germany] 1.8 3.0 2.8

Britain 6.8 7.7 9.3 Italy 5.5 6.5 6.4

Belgium 1.9 3.6 3.5

Netherlands 1.2 1.3 2.6

Spain 5.8 6.9 6.5

United States 4.4 4.6 6.1

Canada 4.1l 5.2 5.0

Japan 1.0 2.6 3.8

Composite index of France's partners2 3.6 4.7 5.0

EEC 12 index (including France) 4.4 5.2 5.7

I. West Germany to September 1990; unified Gernany thereafter. 2. Germany, Italy, Britain, Belgium, Nctherlands, Spain, United States. The price index for these countries is obtained by weighting their national indexes by total French trade (imports + exports) with the countries in ye:us n-2 and n-3.

Source: Insee, 1990

In Japan, where prices accelerated as well, the oil shock does flot seem to have been a major factor, since it was almost entirely offset by the yens rise against the dollar.

In Germany, despite monetary unification and robust growth, inflation remained under control owing to the marks appreciation vis-à-vis the dollar, the effect of indirect taxation, and the fall in farm prices.

Monetary policies were marked by the cyclical lag: the tightening in Japan and Germany contrasted with the easing in the U.S., later followed by Britain.


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LA CONJONCTURE TENDANCES DE LA CONJONCTURE .................. .. ... I. INFORMATIONS RAPIDES ........ .. ............. ... .. ... l'. BULLETIN MENSUEL DE STATISTIQUE ... .. .... ....... .. ... Il NOTE DE CONJONCTURE ........ .. .. .. .. ... .. .. ... I; NOTE DE CO NJON CTURE INTER N ATIONALE ... .. ....... .. ... I. CONJONCTURE IN FRANCE .. .. ..... .. .. .. ....... .. ...

L'INFORMATION SUR L'INFORMATION BLOC NOTES DE L'OBSERVATOIRE ÉCONOMIQUE DE PARIS .... I INSEE INFOS ............ .. .. ..... .. .. .. ... .. .. .. .. ... Il INSEE NEWS ..... ....... ..... .. .. ......... ..... IJ LA CARTA DEL INSEE ....... ... .... .. .. .. ... .. ......... I.7 LA LETTRE DE L'INSEE ........... .. .. .. .. ... .. ......... Il COURRIER DES STATISTIQUES ........................... I SCRIBECO ............ ................... .. ... .. .... I! BULLETIN BIBLIOGRAPHIQUE .... .. .. .. .. ..... .. ....... .. Il

Je souhaite recevoir le catalogue des publications de l'INSEE

Ci-joint un chèque de ..................... FF* ' pour l'étranger libellé en FF.

(Total des abonnements) à l'ordre de l'Insee

Date : Signature :

BULLETIN D'ABONNEMENT A retourner à : INSEE - CNGP BP 2718 80027 AMIENS Cedex

Nom, Prénom

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Adresse complète

fl~ INSTITUT NATIDNAL TARIF 1991 DE LR STRTISTIDUE

ET DES ÉTUDES ÉCDNUMIDUES LES PÉRIODIQUES

LES PUBLICATIONS

INSEE PREMIERE INSEE MÉTHODES En 4 pages, la primeur des données et conclusions La méthodologie des travaux de l'INSEE et les modèles, essentielles tirées des travaux de l'INSEE dans Vente exclusive au numéro d les observatoires sur les thèmes qui font l'actualité. l économiques régionaux de l'INSEE. . Abonnement (60 numéros/ France : 425 F - Étranger : 532 F' Étranger avion : 682 F

INSEE CADRAGE ÉCONOMIE ET STATISTIQUE En moins de 100 pages, une présentation des enquêtes de Revue centrale de l'INSEE, ses articles traitent de sujets couvrant

l'INSEE : résultats, commentaires, compléments un vaste champ de la réalité sociale et économique de notre pays

méthodologiques et bibliographiques, sans oublier la dimension européenne.

Abonnement Abonnement 1 an (11 numéros) Édition sur papier : France : 390 F - Étranger : 488 F

Franco 650 F - Étrangerr : : 812 F Fr : : Étranger avion : 598 F anc 6 des thèmes, numéros/

Étranger avion : 912 F

INSEE RÉSULTATS ANNALES D'ECONOMIE ET DE STATISTIQUE Les données détaillées des enquêtes et opérations statistiques de l'INSEE. Des travaux originaux de recherche théorique ou L'ensemble INSEE CADRAGE et INSEE RÉSULTATS appliquée dans les domaines de l'économie, de est articulé en 5 thèmes : • Économie générale l'économétrie et de la statistique.

Démographie-société •Consommation-modes de vie Système productif •

revenus. • Système • nner es' à Abonnes est 1 an (4 numéros) Édition sur papier : France : 380E- Étranger : 475 F

Il est possible de s'abonner à un, plusieurs ou tous les thèmes.

®

Étranger avion : 515 F

__ Pour les particuliers : Abonnement 1 an (4 numéros)

Abonnement INSEE CADRAGE + INSEE RÉSULTATS France : 139 F - Étranger : 174 F

Économie générale (20 numéros) Étranger avion : 214 F

Fra 1 300 F Étranger 1 625 F Etraegee avion : 1 875 F Démographie-Société (7 numéros) Fra 45 F Et ranger . 570 F Et rang o : 657F____

3615 ou 361 r~ ,C Ii 67~

Consommation-Modes de vie (8 numéros) France: 520 F - Étranger : 650 F - Étranger avion r 750 F

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I SLE Franco:1 62F Étranger 2030E- Etrangee avion : 2 343 F

Emploi revenus (20 numéros) TOUS LES INDICES France r 1 300 F Étranger 1 625 F - Et ranger avion : 1 875 F wrsl

Ensemble des 5 thèmes l80 nu éros) ~m L t .IWvr ÿ l di en F - b 500 F Etg - i 7 500 F A bonn : 5 et o ic r fiche: ULTA

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Abonnement sur microfiches INSEE RÉSULTATS SEUL

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(ensemble des thèmes) ^'~o

.._..._..__.,.`..^' ovins Fr»nie '2 .?no F - Ftrannee 2 R75 F - Ftra .? 75(1 F

Veuillez noter mon abonnement aux publications suivantes INSEE PREMIÈRE ... .. .. .... ... .... ..... Il INSEE CADRAGE (ensemble des thèmes) .................... ii INSEE CADRAGE + INSEE RÉSULTATS par thèmes: .. .... ... .. I1 - Économie générale .............. .. .. .... ... .... ... .. LI - Démographie - Société ....... ...... ...... ... .... ... .. L1 - Consommation - Modes de vie.................... i - Système productif .... ... .... .. .... ............. ..... Il - Emploi -revenus ....... .. .. .. .... ............. ... .. I.l - Tous thèmes ..... ................ ......... ..... IJ INSEE RÉSULTATS Isur microfiches, tous thèmes)......... . U ÉCONOMIE ET STATISTIQUE .. .. .. .... .. ......... .. ... .. ❑ ANNALES D'ÉCONOMIE ET DE STATISTIQUE ................ ❑

Ci-joint un chèque de ..................... FF* ' pour l'étranger libellé en FF.

(Total des abonnements) à l'ordre de l'Insee :

Date : Signature :

BULLETIN D'ABONNEMENT A retourner à : INSEE - CNGP BP 2718 80027 AMIENS Cedex

Nom, Prénom

Société

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Adresse complète

DANS CHAQUE OBSERVATOIRE ÉCONOMIQUE RÉGIONAL

• • AMIENS CAEN ROUEN

RENNES • PARIS NANTES •

ORLEANS

• Service d'information. • Publications de l'INSEE. • Adresses des entreprises et établissements (SIRENE). • Accès au fond documentaire et aux banques de données de l'INSEE.

• Travaux à la demande.

• NANCY

REIMS •

D'AN J POUR EN SAVOIR PLUS BESANÇON consultez l'observatoire économique

de votre région ou... IERS • . LIMOGES CLERMONT- LYON ~,,

TAPEZ FERRAND ■l BORDEAUX

' 36.15 MONTPELLIER MARSEILLE

TOULOUSE

• r i~ ou 36.16 - _ AJACCIO

code INSEE

ALSACE (Bas-Rhin, Haut-Rhin) 14, me Adolphe Seyboth, 67084 STRASBOURG CEDEX - Tél.: 88.32.03.18 - Tél.: Indices cou-rants 88.22.43.53.

AQUITAINE (Dordogne, Gironde, Landes, Lot-et-Garonne, Pyrénées-Atlantiques) 33, rue de Saget, 33076 BORDEAUX CEDEX Tél.: Indices courants 56.91.84.90 - Tél.: autres informations 56,91.89,90.

AUVERGNE (Allier, Cantal, Haute-Loire, Puy-de-Dôme) Carrefour Europe 3, place Charles de Gaulle - BP 120, 63403 CHAMALIERES CEDEX - TOI.: 73.36.03.50 Tél. : Indices courants 73.36,79.90.

BOURGOGNE (Côte-d'Or, Nièvre, Saône-et-Loire, Yonne) Immeuble " Mercure 13, avenue Albert t"- BP 1509, 21035 DIJON CEDEX - Tél. : 80.43.31.45 - TOI.: Indices courants 80.45.28.24.

BRETAGNE (Côte d'Armor, Finistère, Ille-et-Vilaine, Morbihan) Immeuble "Le Colbert" 36, place du Colombier - BP 17, 35031 RENNES CEDEX - Tel.: 99.29.33.66 - Tél.: Indices cou-rants 99.35.15.00.

CENTRE (Cher, Eure-et-Loir, Indre, Indre-et-Loire, Loir-et-Cher, Loiret) 43, avenue de Paris - BP 6719, 45067 ORLEANS CEDEX 2 - Tél. : Indices courants 38.68.18.28 Tél. : Autres informations 38.54.54.65.

CHAMPAGNE-ARDENNE (Ardennes, Aube, Marne, Haute-Marne) 1, rue de l'Arbalète - 51079 REIN"c -'r^°° T` 26.48.42.80.

CORSE (Corse-du-Sud, Haute' 1, Résidence du Parc Belvédè- AJACCIO CEDEX - Tél. : 95. dites courants 95.51.02.95.

FRANCHE-COMTE (Doubs, Jura, Haute-Saône, Territoire de Belfort) Immeuble " Le Major 83, rue de Dôle, 25042 BESANCON CEDEX Tél.: Indices courants 81.52.03.33 Tél. : Autres informations 81.52.42.20.

LANGUEDOC-ROUSSILLON (Aude, Gard, Hérault, Lozère, Pyrénées-Orientales) 274, allée Henri Il de Montmorency "Le Polygone", 34064 MONTPELLIER CEDEX - TOI. : 67.65.58.00 Tél. : Autres informations 67.64.31.95 - Tél. : In-dices courants 67.64.64.53.

LIMOUSIN (Corrèze, Creuse, Haute-Vienne) Adresse postale : 29, rue Beyrand 87031 LIMOGES CEDEX - Accueil : 50, avenue Garibaldi 87031 LIMOGES CEDEX - Tél. : 55.79.26.25 - Tél. Indices courants 55.32.99.09.

LORRAINE (Meurthe-et-Moselle, Meuse, Mo-selle, Vosges) 15, rue du Général Hulot Case officielle 3846, 54029 NANCY CEDEX - Tél. 83.27.03.27 - Tél. : Indices courants 83.27.21.21.

MIDI-PYRENEES (Ariège, Aveyron, Haute-Ga-ronne, Gers, Lot, Hautes-Pyrénées, Tarn, Tarn-et-Garonne( 36, rue des 36 Ponts, 31054 TOULOUSE CEDEX - Tél. : 61.36.61.13 - Tél.: Indices courants 61.25.42.67.

NORD-PAS-DE-CALAIS (Nord, Pas-de-Calais) 10-12, boulevard Vauban 59800 LILLE Tél.: 20.30.89.87.

BASSE NORMANDIE (Calvados, Manche, Orne) 93-95, rue de Géole, 14051 CAEN CEDEX

SEFE- 1 EiL

HAUTE-NORMANDIE (Eure, Seine-Maritime) 8, quai de la Bourse, 76037 ROUEN CEDEX Tél. : 35.52.49.94 - Tél. : Indices courants 35.98.41.10.

ILE-DE-FRANCE (Paris, Essonne, Hauts-de-Seine, Seine-Saint-Denis, Seine-et-Marne, Val-de-Marne, Val d'Oise, Yvelines) OEP. Tour" Gamma A " 195, me de Bercy, 75582 PARIS CEDEX 12 - Tél. : Indices courants (1) 43.45.70.75 - réévaluation et indexation (l) 43.45. 72.31- autres informations (1) 43.45.73.74.

PAYS DE LA LOIRE (Loire-Atlantique, Maine-et-Loire, Mayenne, Sarthe, Vendée) 5, boulevard Louis Barthou - BP 2189 44204 NANTES CEDEX 02 - Tél. : 40.41.79.80 Tél. : Indices courants 40,89.36.10 - Tél.: Autres informations 40.41.75.75

PICARDIE (Aisne, Oise, Somme) 1, rue Vincent Auriol 80040 AMIENS CEDEX Tél.:22.91,39.39-TOI.: Indices courants 22.91.91.91

POITOU-CHARENTES (Charente, Charente-Maritime, Deux-Sèvres, Vienne) 3, rue du Puygarreau, 86020 POITIERS CEDEX Tel. : 49.88.38.71 et 72 - Tél. : Indices courants 49.88.38.70

PROVENCE-ALPES-COTE D'AZUR (Alpes-de-Haute-Provence, Hautes-Alpes, Alpes-Mari-times, Bouches-du-Rhône, Var, Vaucluse) 17, rue Menpenti 13387 MARSEILLE CEDEX 10 Tél.: Indices courants 91.78.01.95 - Tél. : Autres informations 91.83.00.22.

in, Ardèche, Drôme, Isère, Haute-Savoie) BP 3196 - 69401 LYON

ninistrative de la Part-Dieu) 01. : Indices courants 78.63. formations 78.63.22.02 et 03. IiVP~f'iiffilll~II~IIIIIIIIIIÎII~I~~I~IIIIPJI@!!~~Illf

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voir - ~g~i=;. Re-- -gin '

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ANTILLES-GUYANE INSEE gional Tour Secid, 7" étage, Place ne ta tceno-vation BP 863, 97175 POINTE-A-PITRE CEDEX Tél.: 19.590.91.59.80. GUADELOUPE INSEE : Service Régional Rue Paul Lacave BP 96, 97102 BASSE-TERRE Tél. : 19.590.81.42.50.

I, rue Maillard Dumesle BP 6017, 97306 CAYENNE CEDEX - Tél.: 19.594.31.56.03

,EE : Service Régional Accueil : Pointe de Jaham, Lotissement des glycines 97233 SCHOELCHER - Adresse postale : B.P. 605 97261 FORT DE FRANCE CEDEX Tél. : 19.596.61.61.49.

REUNION INSEE : Observatoire Régional 15, rue de l'Ecole 97490 SAINTE-CLOTILDE Tél. : 19 262.2951.57.

Reproduction d'après documents fournis - Imprimerie Nationale - 1 170650 T 84

m

The French econoiny—litre that of the other industriel nations except Germany and Japan — slowed in 1990. French gross domestic product rose by only 2.6 % compared with 4 c/ in 1988 and 1989.

Investment and exports, the engines of earlier growth, were particularly affected. On the positive ride, inflation stayed on a downward course, while real household income climbed and the household saving rate continued tu recover. Unemployment, however, remained the major imbalance despite the further vise in employment during the year.

This booklet, specially prepared for English-speaking readers, provides a convenient summary of the year-in-review section of the original 1990 Rapport sur les comptes de la Nation, issued by Insee on behalf of the French government.

782110 659514 ISSN 1140-5252 / ISBN 2-1 1-06595 1-3 / RAPCNA 90 / Price FF 30

coping with global uncertainties - insee · coping with global uncertainties ... year and serves as...

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