eco TV Week

France’s economic situation at the start of 2021


On Friday 29 January, the first estimates of France’s Q4 2020 national accounts will be published, giving us an opportunity to review the current economic situation and our short-term forecasts.


TRANSCRIPT // France’s economic situation at the start of 2021 : January 2021

On Friday 29 January, the first estimates of France’s Q4 2020 national accounts will be published, giving us an opportunity to review the current economic situation and our short-term forecasts. We expect the Q4 figures to show a fall in GDP, due to the second lockdown imposed between late October and mid-December. Like INSEE and the Banque de France, we expect a quarterly contraction of 4%, taking the fall in GDP in 2020 as a whole to 9%.

Because the November lockdown was less stringent than the one in March and April, there was less of a negative impact on activity. Indeed, the Banque de France estimates an 11% loss of output as opposed to 30% in April. In other words, the French economy was running at 89% of its normal level of activity in November, versus 70% in April. In December, as the lockdown started to be eased, this figure rose back to 93%, having been at 97% in October.

These rollercoaster movements can also be seen in business confidence figures, and it’s worth noting that in December, INSEE’s composite index regained all the ground it lost in November. On the consumer spending front, it seems anecdotal evidence is also very positive in December. It remains to be seen however whether that was enough to wipe out the decline in November, when consumer spending on goods fell 19%, as it did in April incidentally.

So these indicators ended 2020 on a positive note, but how has 2021 started? In terms of the public health situation, the vaccination rollout has started and is ramping up gradually. But at the same time, fears of Covid-19 spreading more quickly again have caused certain restrictions to be extended, and we have seen the introduction of a 6pm-6am curfew covering the whole of France, initially scheduled to last until the end of January. And we can expect lockdown measures to be tightened further in the next few weeks.
INSEE business sentiment surveys in January show no trace of the worrying public health situation and this is goods news. Indeed, the composite index slightly improved contrary to expectations of a fall. This supports the Banque de France’s preliminary estimate that the loss of output in January will be similar to that seen in December, i.e. 7%.

What does that mean for Q1 GDP? It is still hard to say, because the economic situation depends so much on the public health situation, which remains highly uncertain. Since things are most likely to get worse, we are expecting GDP to fall again in Q1, by around 1%. At the moment, the light at the end of the tunnel resulting from the vaccination programme is like the flickering glimmer of a candle. Thanks for watching and see you again next week for a new edition of EcoTV Week.



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