ILE-DE-FRANCE ECONOMY SUFFERS FROM SLUGGISH WORLD ECONOMY 2 nd quarter of 28 Even though Ile-de- showed the first signs of a slowdown at the beginning of the year, it held out fairly well against a slowing of the French economy and the global economy more generally. However, regional economic trends closely follow national trends and the outlook for most business sectors is mixed for the end of 28 and, over the longer term, for the whole of 29. Even indicators that had not pointed to a faltering economy weakened at the very beginning of the year, particularly the unemployment rate and the number of business start-ups, levelled off in the 2 nd quarter of 28. The expected downturn in the real estate market in and Ile-de- gives rise to concerns of a difficult situation in the months ahead for the construction industry, which is experiencing many business failures. ECONOMIC SITUATION IN FRANCE September 28 PARIS-REGION key economic INDICATORS The French economy is being buffeted by the effects of financial uncertainty and rising inflation at the global level. The hardening of the European Central Bank s monetary policy as a means of containing price increases has also had an impact on growth. The impact has been less severe in than in other European countries, including Spain, United Kingdom and the Baltic countries, but GDP declined by.3% in the 2 nd quarter, according to INSEE, the French statistics office. Improvement in the labour market seems to have reached its peak and the unemployment rate remained at an average of 7.2%, or 2 million people, in the 2 nd quarter of 28. Moreover, while a large number of businesses were created, a sizable number failed too. Household consumption remained weak due to high inflation. While it may hold down energy costs, the euro rate (despite a slight decline in early September) continues to hinder competitiveness in several sectors and no significant improvement is expected in foreign trade. ECONOMIC SITUATION IN EUROPE In the 2 nd quarter of 28, GDP in the European Union of 27 declined by.1% compared to the previous quarter, according to Eurostat s preliminary estimates (GDP in the euro area dropped by.2% in the same period). In the 1 st quarter of 28, GDP had risen by.6% in the EU27 and.7% in the euro area. Year-on-year, GDP grew by 1.6% in the EU27 and by 1.4% in the euro area as against 2.3% and 2.1%, respectively, three months earlier. All GDP components, including household expenditures, investments, exports and imports, all fell in the 2 nd quarter and a number of countries have realistic fears of a recession. Furthermore, growth forecasts for the euro area have again been revised downward, especially since inflation has remained high. A consensus seems to have formed around 1.3%. That holds true for the European Commission, which lowered its April estimate from 1.7% to 1.3%; the OECD, which consequently decreased its forecast from 1.9% to 1.7% and now to 1.3%; and the Coe-Rexecode.
ECONOMIC BACKGROUND NATIONAL INDUSTRIAL OUTPUT INDEX After a good month in April (+1.5% month-on-month), the industrial output index excluding energy and the food and agricultural industries recorded a rather significant decline in May (-2.7%) that continued into June (-.8%). The index thus stood at an end-of-quarter level that had not been reported since the summer of 26; year-onyear, the index lost 1.6% at end-june. The same trends were in evidence if energy and the food and agricultural industries are included (the month-onmonth changes in the output index were +1.3%, -2.9% and.4% respectively in April, May and June). 18 17 16 15 14 13 12 11 1 99 98 French industrial output indices Base year : 1 in 2 Industry Industry excl. energy, food and agriculture 25 26 27 28 The output data used in the industrial output index account for 9.8% of the value added generated by non-craft entreprises (entreprises with 1 or more employees belonging to industries 1 to 45 under the French NAF industrial classification system.) Source: INSEE ECONOMIC SITUATION IN EUROPE Source: OECD PARIS ILE-DE-FRANCE REGION: KEY FIGURES Indicators Area (in sq. km.) Number of municipalities Population (31 January 27 - INSEE estimates) Population density per sq. km. GDP in 25 (in millions of euros - INSEE) Paris Ile-de- Region 27 forecast 28 2.6 2.6 1.3 2.2 % Paris-Region/ 12,12 543,965 2.2 1,281 36,565 3.5 11,577, 61,538,322 18.8 964 113 2.1 2. 48,87 1,681,727 28.6 2.1 27 forecast 28 1. 2.6 2.8 1,5 1.9 GDP growth 2.8 2.2 1.7 euro area Germany Belgium Italy The Netherlands United kingdom Inflation 2. 2.4 2.1 2.1 euro area Germany Belgium Italy The Netherlands United kingdom 1.4.1 3.5 1.7 2.3 3. 2. 1.2 2.2 GDP/per inhabitant 25 (in euros) GDP/job 25 (in euros) Dependent employment (March 28 - Unédic) Number of cat. 1 jobseekers (June 28 - DRTEFP) 42,712 27,957 89,989 68,677 4,13,2 16,667,9 24.6 373,1 1,96,2 2. 2
DEPENDENT EMPLOYMENT 4,1, 4,5, 4,, 3,95, 3,9, 3,85, 3,8, Source: GARP - Unédic Dependent employment (seasonally adjusted data) Paris Ile-de- Region 22 23 24 25 26 27 28 16,8, 16,6, 16,4, 16,2, 16,, 15,8, 15,6, 15,4, +1.8% 1 st quarter of 28 Year-to-year change Dependent employment rose again in the 1 st quarter of 28 in the Paris Ile-de- region (+1.8% compared to the 1 st quarter of 27). The trend was also upward at the national level at an almost identical rate (+1.7%). Despite this overall increase, employment in the industrial sector continued to decline in the region at a consistently steady rate, falling by 2.2% year-on-year in the Paris Ile-de- region, while the decline was less marked in as a whole (-.9%). On the other hand, dependent employment posted its strongest gains in the construction sector (+4.9%). At the département level, Paris once again recorded a slight decline (-.2% year-on-year) in its level of dependent employment. The other départements saw an increase in the dependent workforce, with the largest rises in Essonne (+4.3%) and Seine-Saint-Denis (+3.8%). J O B - S E E K I N G As in the 1 st quarter, the downward trend in the number of job-seekers was less marked in the 2 nd quarter of 28 than at any time over the past three years. The month-on-month changes in Ile-de-, however, compare favourably with as a whole; even recorded a higher number of job-seekers at end-june than at end-december. In Ile-de-, the end-june number still stood at 1.8% below the December 27 figure and 7.8% below the June 27 figure, with 373,1 people seeking work at the end of the 2 nd quarter. At the local level, all the départements in the Paris Ile-de- region recorded a year-on-year decline in June. The inner ring départements particularly contributed to this decline: year-on-year, the number of job-seekers dropped by 1.7% in Val-de-Marne, by 1.% in Hauts-de-Seine and by nearly 1% in Seine-Saint-Denis (-9.7%). 6, 55, 5, 45, 4, 35, 3, -7.8% June 28 year-on-year Number of job-seekers at end-month (Category 1, seasonally adjusted) Source: DRTEFP Paris Ile-de- Region 2,6, 2,5, 2,4, 2,3, 2,2, 2,1, 2,, 1,9, 1,8, 21 22 23 24 25 26 27 28 EMPLOYMENT UNEMPLOYMENT 9.5 9 8.5 8 7.5 7 6.5 6 Unemployment rate (seasonally adjusted quarterly average, in %) Paris Ile-de- Region RATE 2 21 22 23 24 25 26 27 28 Source: INSEE Ile-de- 7.2 6.6 6.6% 2nd quarter of 28 After several quarters of uninterrupted decline, the Paris Ile-de- unemployment rate came to a complete standstill in the 2 nd quarter of 28, levelling off at 6.6% of the working population after then already - a less significant drop in the 1 st quarter. Even so, the decline still amounted to 1.1 points year-onyear. All of the Paris Ile-de- départements treaded water. Nevertheless, the départements with the highest unemployment rates (Seine-Saint-Denis at 9.3% and Val-d Oise at 7.%) dropped by.1 of a point. By contrast, unemployment rose by.1 of a point in départements with rates below the regional average (Yvelines at 5.2% and Seine-et-Marne at 5.5%). For as a whole, the trend is exactly the same as in Paris Ile-de- and the average unemployment rate in the 2 nd quarter was 7.2%. 3
DEPARTMENT STORES DOMESTIC DEMAND PERSONAL CONSUMPTION EXPENDITURE +4.4% June 28 Year-to-year change Over the 2 nd quarter of 28, personal consumption expenditure on manufactures remained completely stable (following a.1% rise in the 1 st quarter of 28). More specifically, spending on durable goods picked up (+1.4% after only a.2% rise over the first three months of the year), as did household purchases of motor vehicles, which grew by 1.9% (against a.7% decrease in the previous quarter). Purchases of household goods continued their upward trend (+1.3% following +1.1% in the 1 st quarter). Spending fell only in the category of textiles and leather goods (-1.7% after a drop of 1.4% in the 1 st quarter). 125. 12. 115. 11. 15. 1. 95. 9. Sales volume indices (Seasonally adjusted; base year = 1 in 25) Manufactures Including commerce Durables Textile & leather Other manufactures 25 26 27 28 Source: INSEE Note: volume data in the quarterly accounts are now calculated as chained volume estimates at the previous year's prices. The main benefit of this calculation is the weighting of the elementary levels that make up an aggregate (products or industries) by the most recent weightings (the previous year's prices and not year 2 prices). DEPARTMENT STORE BUSINESS Over the 2 nd quarter of 28, the volume of department store business in the Paris Ile-de- region rose slightly compared to the same period in 27 (+1.4%). Despite the impact of rising inflation on French customers and of the high euro/dollar exchange rate on US customers, department store turnover resumed its upward trend after a slight weakening during the 1 st quarter. The coming months may benefit from slowing inflation in as well as the euro s decline against the dollar. VEHICLE REGISTRATIONS 14, 12, 1, 8, 6, 4, 2, New cars Used cars Total -7.8% June 28 Year-on-year New and used private car registration in the Paris Ile-de- region 26 27 28 Source: Ministry for Ecology, Energy, Sustainable Development and Town & Country Planning - SESP, Central motor vehicle register In the 2 nd quarter of 28, 31,98 private cars were registered in Paris Ile-de- (of which 33% were new cars, a figure that has remained relatively stable). Over the course of the quarter, registrations fell by.7% compared to the same period last year but increased by 9.% compared to the first three months of the year. Yearon-year changes, the total number of private car registrations every month gradually lost steam in the 2 nd quarter, dropping from +11.3% in April to 4.3% in May then to 7.8% in June. Higher oil prices and the decline in French household confidence may explain this trend. For as a whole, the total number of registrations was more dynamic than in Paris Ile-de-, rising yearon-year in the 2 nd quarter of 28 from +1.9% and, compared to the previous quarter, it even reached +5.1%. 12 115 11 15 1 95 9 85 8 +1.4% 2 nd quarter of 28 - Year-on-year Changes in the volume of business of Paris Ile-de- region department stores (Indices adjusted for seasonal & daily change - Base year = 1 in 2) 13 Business volume 125 Smoothed volume of business 23 24 25 26 27 28 Source : CROCIS/CCIP 4
21, 2, 19, 18, 17, 16, 15, BUSINESS START-UPS Paris Ile-de- Region 19,641 business start-ups 2 nd quarter of 28 19,641 business start-ups were recorded from the beginning of April to the end of June. Year-on-year, the number of business start-ups in the Paris region rose by 1.9% in the 2 nd quarter of 28 but the upward spiral has apparently ground to a halt and the rate has remained stagnant since the end of 27. In number of start-ups, the most dynamic sectors were once again business services (6,322 start-ups), retailing and the repair trade (4,26 start-ups) and construction (2,853 startups). Even though the transport sector accounts for far fewer start-ups (79), the number increased by 12.5% over three months and 21.8% over a one-year period. Note: Since 1 January 27 the concept of "business start-up" has been changed. It is now based on a new concept harmonised at the European level which defines a business start-up as the establishment of a legal trading entity which has no predecessor and employs new means of production. Business start-ups in the Paris Ile-de- Region (seasonally adjusted data) Source: INSEE Ile-de- 26 27 28 89, 19,641 84, 82,973 COMMERCIAL PROPERTY 79, 74, 69, 64, Take-up of office space in Paris Ile-de- again rose slightly in the 2 nd quarter compared to the 1 st quarter, with 594, sq. m. having been marketed to corporate clients. Although this volume was down 17.5% over the same period in 27, the market has been unstable over the past year. Weak demand, combined with rent levels and the economic climate, are having an impact on marketing levels despite companies modernisation needs. 3,5 3,3 3,1 2,9 2,7 2,5 2,3 2,1 1,9 1,7 1,5 BUSINESS FAILURES Paris Ile-de- Region 2,825 business failures 2 nd quarter of 27 Following two consecutive quarters of positive growth, the number of business failures in Paris Ile-de- dropped in the 2 nd quarter of 28 compared to the first three months of the year. Failures, however, occurred at a higher rate in April, May and June than during the same three months in 27 (+8.2%). For as a whole in the 2 nd quarter of 28, the number of failures rose even more (+15.2%) and involved 11,792 companies. Year-on-year, business failures only declined in the industrial and transport sectors, but only by 1.5% and 1.%, respectively, while construction recorded a rise of 15.2%. The latter sector accounts for the largest proportion of business failures: 775 were reported, amounting to 27% of the total. Business failures in the Paris Region (gross data) 21 22 23 24 25 26 27 28 Source: INSEE Ile-de- 14, 13, 11,792 12, 2,825 11, 1, 9, 8, 7, 6, 594, sq. m. of office space marketed in the 2 nd quarter of 28 9 8 7 6 5 Quarterly changes in take-up of office space and in the average rent Take-up (in thousands of sq.m.²) Average rent (in euros) 34 32 3 28 COMPANY DEMOGRAPHY 4 Following a slight slowdown during the first three months of the year, the average rent in Paris Ile-de- 3 again rose in the 2 nd quarter of 28: on average, 2 it stood at 318 euros per sq. m., or 1.9% above the 1 previous quarter and 5.6% above its level one year earlier. 2 21 22 23 24 25 26 27 28 26 24 22 Source: CB Richard Ellis / Immostat 5
INTERNATIONAL PERSPECTIVE EXTERNAL TRADE Crude CIF/FOB data* (in real terms, excluding military equipment, in millions of euros) 4, 35, 3, 25, 2, 15, 1, 5, 22 23 24 25 26 27 28-5, -1, -15, -2, Regional exports Régional imports Trade balance Source: Customs and Indirect Taxes Directorate, Ministry of the Budget, Public Accounts and the Civil Service *CIF/FOB: Accounting method which consists of considering imports cost, insurance and freight and exports free on board HOTEL TRADE The hotel business recorded mixed results in the 2 nd quarter of 28. While the overall occupancy rate rose, growth was weak in April (+.2 of a point year-on-year), stronger in May (+3.4 points), then declined by 1.2 points in June to 83.4%. Luxury hotel occupancy nevertheless remained particularly high. The month of May and its long weekends posted a rather healthy occupancy rate, while June recorded a modest decline compared to June 27 thanks to business tourism (the proportion of business travellers increased by 9 points year-onyear). The number of bed nights in the 2 nd quarter totalled 17.7 million. The number of foreign visitors grew due to the influx of European guests while occupancy by tourists from the United States and China significantly declined in comparison with the previous year. 14 13 12 11 Exports +8.4% 2 nd quarter of 28 year-on-year Confirming the good results achieved in the 1 st quarter, the value of exports declared by businesses in the Paris Ile-de- region again rose in the 2 nd quarter of 28 (+8.4% year-on-year), reaching 16.2 billion euros. 27 started out rather sluggish, however, and exports in the 2 nd quarter were down 1% over the same period in 26. Despite higher energy prices, the value of Paris Ile-de- imports in April, May and June only grew by 5.5% compared to the same period in 27 (to 3. billion euros) and even dropped 1.3% quarter-on-quarter. The region's trade deficit thus rose to 13.9 billion euros in the 2 nd quarter, i.e. 3 million euros less than one year earlier and 163 million euros less than in the 1 st quarter. +83.4% Regional hotel occupancy rate June 28 Hotel occupancy rates (in %, crude data) A I R P O R T T R A F F I C +2.9% Passenger traffic - June 28 Year-on-year National Passenger traffic (seasonally adjusted data, millions of passengers) International 1 9 8 7 6 5 4 3 2 1 26 27 28 65.8 68.7 75.8 76.1 78.6 83.4 January February March April May June July August September October November December Source: INSEE - Tourism Department (coverage: to 4-star luxury hotels) Year-on-year, passenger traffic at Paris airports recorded a 2.9% upswing in June. Once again, this increase in traffic is due to the growth in international traffic (+4.6% year-on-year in June) while domestic traffic continued its downward trend (-3.9% year-onyear in June). 1 9 8 7 Over the course of the quarter, traffic grew more rapidly than it had in the 1 st quarter (+4.2%, +6.% and +2.9% year-on-year for April, May and June, respectively) despite higher oil prices, which rose from $1.79 on 1 April to $141.4 on 1 July. 6 2 21 22 23 24 25 26 27 28 Source: Aéroports de Paris 6
INDUSTRY Uneven 2 nd quarter Industrial activity in the Paris Ile-de- region remained stable overall in the 2 nd quarter despite mixed performances. A rebound in June followed a rather marked business decline in May, which itself occurred after a period of growth in April. The automotive industry experienced a particularly rough patch compared to other sectors. Order books thinned out but generally remained at a reasonable level for the period even though they were a little flat in the automotive, agro-food and consumer goods industries. Job numbers continued to dwindle, especially in consumer goods and semi-processed goods. BUILDING AND CIVIL ENGINEERING Reduced demand Well-filled order books enabled this sector to maintain the same level of activity. Reduced demand, however, should begin to be felt in late 28 and into 29. In a less buoyant economy, it was difficult to negotiate higher prices, and hiring levelled off to the detriment of temporary personnel. Across sectors, the market for new housing construction recorded a significant decline, particularly for the building of single-family homes. The number of orders dropped considerably, driving the forecast downward. Infrastructure work, sustained by well-filled order books, has held its own but seems to be past its peak and a slowdown is expected in late 28 and especially in 29. WHOLESALE TRADE Business back on track in 2 nd quarter of 28 In the 2 nd quarter, markets in all sectors held up well: the volume of purchases rose while the volume of sales stabilised. Performances were mixed across sectors, however. In the food trade, the contraction in volumes recorded during the 1 st quarter did not continue into the 2 nd quarter, with purchases and sales both rising. The volume of purchases in the motor trade, which had already grown considerably in the previous quarter, again increased while sales rose but less strongly. The pharmaceutical trade, however, continued the downward trend already noted in previous months, Even so, the forecasts are generally positive for the months ahead. SECTOR ANALYSIS MARKET SERVICES Good short-term outlook Business and demand accelerated in June after slowing down in May; foreign demand remained strong while a recovery took hold in the domestic market. The business trend is still showing growth in computer engineering, with an upswing in cleaning services and, to a lesser extent, in road freight transport and temporary employment. Prices and job numbers remained stable overall, with the exception of car hire (which experienced another decline in these figures), and the short-term forecasts are positive. Source These results are taken from the business climate survey carried out by the Paris Ile-de- Regional Office of the Banque de and are based on a representative sample of businesses in the main sectors of the regional economy.(http: //inbdf/fr/stat_conjoncture/conjonc/idfr.htm) 7
AIRPORT INFRASTRUCTURES AND AIR SERVICES IN ILE-DE-FRANCE Paris Ile-de-: consolidating its position among the world s major airports According to a study conducted by the CROCIS of the Paris Chamber of Commerce and Industry, global passenger traffic did not experience the declines feared after the events of 11 September 21. On the contrary, in subsequent years the industry grew rapidly: from 23 to 27, passenger traffic rose by nearly 36%. Paris and the Ile-de- region have taken full advantage of these trends. Paris-Charles-de-Gaulle is one of the world s major airports: with 59.9 million passengers, it is the 6th largest airport in the world, behind Atlanta (89), Chicago O Hare (76), London Heathrow (68), Tokyo Haneda (67) and Los Angeles (62). In terms of international passenger traffic alone, Paris- Charles-de-Gaulle is even larger, ranking second with 55 million passengers, behind top-ranked London Heathrow with 62 million. The sector also owes its good health in Ile-de- to Orly airport. From 1998 to 27, total passenger traffic at Roissy and Orly increased by 35.8% and total traffic has grown by some 5% each year since 24, with a 22.2% upswing over the past five years. Strong demand in this sector combined with competition from major European airports such as London, Frankfort and Amsterdam have required a high level of investment in recent years, particularly at Roissy, and additional investment is planned for the near future : while Terminal 2G just opened at Roissy on 3 September, Terminal 2 S4 is slated to come on line in 212. 6, 5, 4, 3, 2, 1, 3,567 Global passenger traffic trends (in millions) 3,478 3,471 3,531 2 21 22 23 24 25 26 27 Source: Airports Council International 3,912 +35.8% For more information: Les Enjeux Ile-de-, No. 19: Paris- Ile-de-: une place à conforter parmi les grands aéroports mondiaux, September 28 CROCIS www.crocis.ccip.fr 4,17 4,381 4,796 QUARTERLY FOCUS If you wish to suscribe to the Paris Region Key Economic Indicators, please contact: prkei@paris-region.com Find economic data on Paris - Ile-de- as well as this document which can be downloaded from the Internet sites of CROCIS, CCIP and PREDA: www.paris-region.com www.crocis.ccip.fr The Regional Development Agency is committed to generating businesses and jobs in the Paris Region. - Seeking out projects and bringing them into the region, assisting companies with key projects, sometimes in situations of economic change - Promoting and expanding the economic and technological influence of the Paris Region internationally - Helping to put together an attractive regional package for the long term CROCIS analyses important economic changes in the Paris Region and its administrative zones. CROCIS (Regional Survey Centre for Commerce, Industry and Services) of the Chamber of Commerce of Paris gathers and processes key structural data and data on the economic climate enabling it to identify and analyse economic developments in the Paris Region. Fouad BELMANAA for PREDA Strategic Unit for Sustainable Regional Development Economic and Regional Information Center +33 ()1.58.18.69.46 - fbelmanaa@paris-region.co 3 rue des Saussaies - 758 PARIS Mickaël LE PRIOL for CCIP Regional Economic Analysis Centre CROCIS +33 ()1.55.65.7.91 - mlepriol@ccip.fr 27 avenue de Friedland - 758 PARIS Publication Managers: Pierre TROUILLET (CCIP) - Régis BAUDOIN (PREDA) Editors-in-chief: Jean-Louis SCARINGELLA (CCIP) - Vincent GOLLAIN (PREDA) Design and page-setting: Nathalie CHAMPION (CROCIS/CCIP) Reproduction authorised on the express condition that the source is mentioned Mandatory deposit: September 28 - ISSN: 124-7992 Recycled paper 8