eco TV Week

France: shocking figures reveal the extent of the shock


According to preliminary INSEE estimates, French GDP contracted 5.8% in first-quarter 2020. This contraction gives us a first glimpse of the magnitude of the recessionary shock triggered by the Covid-19 pandemic.


TRANSCRIPT // France: shocking figures reveal the extent of the shock : April 2020

According to preliminary INSEE estimates, French GDP contracted 5.8% in first-quarter 2020. This contraction gives us a first glimpse of the magnitude of the recessionary shock triggered by the Covid-19 pandemic. The Bank of France had forecast a fall of 6%, which gave us forewarning. The figure is indeed really shocking. This is the biggest quarterly decline since 1949, even worse than the 5.3% record contraction reported in second-quarter 1968. Looking at the GDP breakdown, the only positive contribution was from the change in inventory. Household consumption, public consumption, investment, exports and imports all plunged. As to household consumption, the extent of the shock can also clearly be seen in the monthly drop-off in their expenditures on goods in March (down 18%).

Looking at the labour market, three indicators also help us grasp the scope of the shock. First, the number of category A jobseekers jumped by an unprecedented 7% in March. In just one month, it erased 70% of the decline observed since early 2016. Second, hiring reports for jobs lasting more than a month dropped off by a record 23% in March. Third, short-time work applications continue to soar and concern a bit more than 11 million payroll employees, or nearly 1 out of 2 workers.

Regarding the second quarter, French GDP is likely to contract even more sharply than in Q1. Indeed, the first quarter was hit by only two weeks of lockdown, whereas the second quarter will be marked by the negative carry-over as well as the impact of the lockdown over the entire month of April, plus roughly ten days in May. According to INSEE estimates, the instantaneous loss of activity due to the lockdown is still 35%. We see as a good news that the INSEE did not downgrade this estimate compared to the two previous ones in late March and early April. It’s all relative however. Because regarding business confidence, the situation continues to worsen, and dramatically so. Indeed, the INSEE composite index plunged by 32 points in April, after already shedding 11 points in March. And consumer confidence also took a beating, plunging by 8 points in April, an unprecedented drop too. We would like to end this edition of EcoTV week on a more hopeful note, if possible: after bottoming out in April, things should begin to slowly improve again in May.

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