Despite the crises, the economy is still going strong


“We are going through a very curious period. On the one hand, all is not bad: like many companies, our activity is high and our order book is full… But on the other hand, rates are rising, inflation is sustained, we are facing difficulties recruitment and component shortages, not to mention the terrible war in ukraine, just 1,500 km from our borders… Objectively, there are plenty of reasons to worry, and yet there is no panic among business leaders. To believe that our order books and our bank accounts reassure us more than what we read in the newspaper, and allow us to remain relatively optimistic. » Bruno Grandjean leads Redex, a European engineering group that provides advanced technology to high precision industries. In a few sentences, this manager, who employs 400 people in France, Germany, Slovakia and China, sums up the “funny economy” in which French and European companies operate today. But also households, and States.

Funny economy? In fact, the indicators follow each other and do not necessarily point in the same direction. Indeed, 2022 ended with an accumulation of paradoxes… still present at the start of the year. First example: while activity slowed down at the end of 2022 in France as in Europe, unemployment continued to fall sharply (read the marks), while 5 million permanent contracts were signed, a record. And for this year, “Companies say they are maintaining their hiring forecasts, describes Patrick Artus, at Natixis. As for those who are going through a bad patch, they have no intention of laying off workers. »

Another source of astonishment: the financial situation of companies is, overall, better than before the Covid, according to the 2022 national report of the clerks of the commercial courts. Companies which, in fact, are still planning to invest this year, even if the amounts committed could fall in the face of rising rates.

Part of these paradoxes is due to the conjuncture. The outlook for 2023, in particular, is better “than what we feared”, in the words of Christine Lagarde, President of the European Central Bank (ECB). “All businesses insists Patrick Artus, are now convinced that the announced recession will finally spare Europe, including Germany, one of the countries most at risk. » While last month there were still fears of a sustained surge in energy prices, they finally started to fall again. Thanks to a mild start to winter and European responsiveness to varying sources of supply, “stocks are still very high”, he deciphers. Something to breathe a little, for a time at least.

This table does not eliminate the difficulties: energy prices are still three to four times higher than in 2019, particularly hitting energy-intensive companies in all sectors and of all sizes – the eloquent case of bakers is not isolated … And bankruptcies, frozen during the Covid and the “cloaking” of the economy by public aid, started to rise again with an acceleration at the end of 2022.

But the situation does not explain everything. The economic fabric is also shaped by deeper changes. If companies in difficulty do not lay off, or only as a last resort, it is because the labor shortage is chronic, linked in particular to the aging of the population and therefore to a scarcity of workers. Under these conditions, it is better to keep its workforce and lay back during downturns, rather than struggle to recruit once the crisis is over.

The economy is also marked by the traces of older crises. “Companies are currently in a good financial position because they have accumulated cash reserves, retraces Patrick Artus. Scalded by the subprime crisis of 2008, the bosses have, out of prudence, largely under-invested. They are now making up for lost time, to which must be added the colossal investments essential to carry out their environmental transition…” Investment is also supported by…labour shortages. “We automate as much as possible”, testifies Bruno Grandjean, at Redex. A way of “to circumvent the difficulties of recruitment”.


And then, you have to take into account the post-Covid context. “The much-heralded de-globalization during the pandemic has not happened, underlines Pascal Le Merrer, general manager of the Days of the economy (Jéco). On the other hand, globalization has been reorganized, companies have diversified their suppliers and have sometimes brought them closer to their territory. » All this creates activity: it is sometimes necessary to expand or rebuild factories in other countries, to resort to new service providers, etc.

There is also the cash injected during the Covid, still in circulation, at least in part. Not to mention the massive public aid to cushion the surge in energy prices and inflation in general. “Resorbing these colossal sums will take time. And the imbalances caused are perfectly explained in this extraordinary context,” analyzes the economist Marc Fiorentino, recalling the record savings of French households, as well as the high stock market levels.

One thing is certain, uncertainty and volatility, certainly inherent in the economy, have reached record levels. Climate, energy, geopolitics, inflation… Shocks no longer follow one another, they accumulate. “This complicates strategic choices”, confirms Bruno Grandjean. For this year 2023, “the main hazard will be the scale of the Chinese restart, explains Christopher Dembik, at Saxo Bank. It will have a double effect : support for the European economy and inflationary impact, via energy and commodity prices”. The ECB, it “will probably continue to increase its rates but gradually, so as not to weigh too much on activity”, foresees Patrick Artus.

The real issue is 2024, point out especially the economists. Will inflation be there again, and if so, will wages follow? For what level of activity? Will taxes have to be increased to repay the gigantic public aid accumulated since the Covid?

For Bruno Grandjean, “The short term is favorable but the long term, very unfavourable. It’s a bit like the phoney war: for a year nothing happened, and suddenly everything collapsed. We were so worried during the Covid, and in the end nothing happened… Until when will this “funny economy” last? France is about to reach 3,000 billion in public debt…”

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