This Point de Conjoncture is the first to be published since the lockdown started to be lifted in France. As in previous editions, we attempt to measure change in economic activity (GDP) and household consumption almost in real time, using “high-frequency” data available on a daily basis, direct feedback from businesses and professional federations and also the results of business tendency surveys for May. [1]

Although the easing of lockdown is underway, this process is still as difficult as before: we now have to measure phenomena that are not only extreme but which are also shifting, rather like a photographer trying to capture an unusual subject that is constantly in motion. There is a risk that the photo will be a little more blurred than usual. However, we believe that despite the uncertainties inherent in the exercise, some fairly clear trends emerge, in particular a definite, though still partial, upswing in French economic activity, and occasionally a much stronger rebound in household consumption.

Economic activity is certainly picking up, slowly but surely, in most of the major sectors: industry, construction, services. Activity lost as a result of the health crisis is now believed to be “only” around –21% (against the estimate of –33% at the beginning of May). In other words, the French economy appears to be operating at about four-fifths of its pre-crisis level (against only two-thirds during lockdown).

At the same time, during the first week out of lockdown, the expected rebound in household consumption materialised, perhaps even more vigorously in France than in Italy or Spain. We estimate that during that week, consumption was probably “only” 6% down on its pre-crisis level (against –32% estimated in early May). The logical explanation for this sharp rebound is the reopening on 11 May of a large number of shops and activities that had been closed during lockdown. This is partly a one-off rebound, corresponding to purchases that had been postponed. For this reason, the size of the rebound does not, at this stage, indicate what the “steady state” of consumption will be during the next few weeks.

In this respect, the household survey carried out in May provides a wealth of information on the way people view the economic situation: notably, the balance of opinion on the future standard of living in France is at its lowest, while the current saving capacity is at its highest. And households are a little less pessimistic about their personal financial situation than about the situation in France generally. For some, this is because during lockdown they were “forced” to build up savings which can now be used to boost their consumption.

After almost two months of just ticking over, as if holding its breath, the French economy is now trying to come up for air. However, it is resurfacing in a world that is no longer exactly the same as before the health crisis. The virus has changed the game, both geopolitically and economically. Despite massive monetary and fiscal support, there are many reasons why the economy will not return to normal for many months to come. On the supply side, some activities still remain closed at this time, international value chains have been profoundly disrupted, health safety protocols may affect productivity, and the job destructions already recorded in Q1 will now reduce potential activity. On the demand side, all areas may be affected, whether it be foreign trade, corporate investment or household consumption, all of which may be gripped by a wait-and-see attitude in this unprecedented situation.

Assuming that in June, the French economy closes the gap that still separates it from its pre-crisis level by a third, GDP could decline by about 20% in Q2 2020 (after –5.8% in Q1): this is a dizzying figure, but nevertheless in line with what has happened in the world in recent months. Even if economic activity were to return fully to its pre-crisis level by July, French GDP would fall by 8% over 2020; however, such a rapid return to normal seems fairly unrealistic. The overall impact of the health crisis in 2020 will therefore certainly be greater than this figure, because economic recovery, in France and in the world, can be at best only gradual in H2.

 

1. We would like to thank all the partners who have given us continuing support in producing this document, in particular: the CB Bank Card Group, the Directorate-General for Enterprises, SNCF Réseau, RTE, Enedis, France Industrie, the French Federation of Mechanical Engineering Industries, Rexecode, and the Medef, and the major retail outlets that cooperate with INSEE. The estimates in this document are the sole responsibility of INSEE.