France; Sectoral Outlook: services to companies and construction sector to outperformEventually joining the pack of low growth countries:
GDP to grow by 1.6% in 2005:
Private Consumption: weakening of last resort support to growth; overall household spending expected to grow by around 2% in 2005 after 2.3% in 2004
Business Investment: subdued cyclical recovery amidst continuing capital spending abroad; expecting a sub 4% annual pace in 2005 after 3.3% in 2004
Inventories: adjustment for overhang built up in 2004 should weigh on 2005 growth
Construction: housing strength abating but still a main driver for the economy
Exports: continuing underperformance relative to world trade growth reflecting the strong € and well-known weaknesses, i.e. a bad geographic / product specialisation / positioning
SummaryAsset Conclusions:
The current environment appears mostly neutral for stocks at current CAC40 levels with services to companies and construction sectors to outperform, neutral for the €, likely to remain range bound vs. $, also for short term rates with limited upside risks for bond yields, if any. Look for a likely short-lived sell-off/rally following a no/yes vote on the EU Constitution.
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