>Special Report (ECONOMIC RESEARCH)

Beware of the deterioration in the situation of companies

Financial markets are delighted at the few positive signs that have emerged: significant refinancing of loans and an incipient upturn in consumption in the United States, beginning improvements in leading indicators, recovery in the Chinese economy being transmitted to other Asian countries, start of the implementation of fiscal stimulus programmes, effects of the bailout packages for the automobile industry, etc.

However, there is a major threat, i.e. the ongoing deterioration in the situation of companies (we will look at the situations of the United States and the euro zone). It could jeopardise the possibilities of an upturn by leading to a substantial decline in investment and employment, either due to bankruptcies, or to the need to restore profitability.

The encouraging signs that financial markets are clinging on to are well known:

− as a result of the decline in long-term interest rates, refinancing of mortgage loans is rising sharply in the United States

− real estate prices in the United States and the United Kingdom have already fallen drastically, which will contribute to an upturn in demand for housing.

− there is an incipient upturn in consumption in the United States, probably linked to the
favourable effects of disinflation on real incomes; stabilisation of consumer confidence.

− the implementation of the fiscal stimulus programmes is starting in the second and third
quarter of 2009;

− leading indicators are starting to improve;

− car sales are picking up in certain countries (France, Germany) due to the tax incentives
introduced

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