Informations Rapides · 26 February 2021 · n° 51

Purchasing power of GDHI grew in Q4 2020 (+1.5%), despite the decline in GDP (-1.4%) Quarterly national accounts - detailed figures - fourth quarter 2020

Gross disposable household income (GDHI) rose during Q4 2020: +1.5% after +2.8%. Over the year 2020, it increased by +1.1% after +3.1% in 2019. GDHI still rises in Q4, despite the decline in the payroll received by households (−0.5% after +12.2%) linked with the downturn of economic activity and hours worked. Indeed, GDHI benefited from the mechanical decrease of employee social contributions paid by household (−0.7% after +7.6%) and of the decline of taxes on income and wealth (–3.4% after +12.3%), which were also marked by a further housing tax reduction. Moreover, social benefits in cash sharply increased in Q4 (+2.3% after −7.1%): on the one hand, the decrease in activity led to an increase of unemployment allowance and other means-tested social benefits. On the other hand, exceptional measures, such as partial activity and other allowance set in the context of the sanitary crisis, also supported household purchasing power. Finally, despite the decline of the value added of the individual entrepreneurs, their gross operating surplus benefited from the increase of the recourse to the Solidarity Fund.

Households’ consumption deflator remained constant (+0.0% after +0.2%). Thus, Household purchasing power grew again this quarter (+1.5% after +2.7%). Over the year 2020, it increased slightly (+0.6% in 2020, after +2.1% in 2019), despite the historical drop of the GDP (−8.2%). When measured by consumption unit to bring it to an individual level, it still increased in Q4 (+1.3% after +2.5%) and was stable over the year: +0.0% after +1.5% in 2019.

The combined effect of the rise of the purchasing power in Q4 and of the drop in consumption expenditure (−5.4% after +18.3%), strongly increased households' savings rate, which stood at 22.2% after 16.5% in Q3. On average over the year, households' saving rate went up by 6.4 points (21.3% in 2020 after 14.9% in 2019).

Total hours worked dropped by 2.8% during Q4 (after +22.9%). This drop was mainly due to the higher use to the partial activity scheme and to the slight decrease in overtime hours. Total hours worked remained way below their pre-crisis level (−7.0% year on year). Over the year, total hours worked dropped by almost 9%.

In Q4 2020, non financial corporations' profit ratio slightly increased (30.4% after 29.7%). Value added declined again after a new rebound in Q3; however, the fall in the total payroll, and with it, the fall in social contributions and taxes, compensated this effect. Profit ratio also benefited from the extend on the conditions of the Solidarity Fund : total amounts paid represent half of the amount paid this year. In Q4, the Solidarity Fund benefited mostly to the non financial corporations, and then to the individual entrepreneurs.

On average this year, non-financial corporations' profit ratio decreased by 4 points, and stood at 29.3% in 2020 after 33.2% in 2019, reaching its lowest level since 1985. Around one quarter of this fall is due to the removal of the CICE in early 2020.

In Q4 2020, GDP measured in volume fell (–1.4%) after its rebound in Q3 (+18.5%). In Q4, during which the second national lockdown and curfews were enforced, GDP stood 4.9% below its level in Q4 2019 (year-on-year evolution). Its year-on-year decline was moderate when compared to the drop in Q2, when the first lockdown occurred (–18.6% year-on-year). On average in 2020, the economic activity unprecedentedly fell, by −8.2% after +1.5% in 2019. The annual estimation of the activity drop and other economic aggregate established by summing all 4 quarters will be consolidated at then end of May 2021, along with the publication of the provisory annual account of 2020.

The sanitary measures in Q4 were reflected in a sharp drop of households’ consumption expenditure (−5.4% in Q4, after +18.1% in Q3). In contrast, gross fixed capital product (GFCF) continued the recovery which had already begun last quarter (+1.1% in Q4 after +24.1% in Q3). Overall, total domestic demand (excluding changes in inventory) fell, contributing by –2.9 points to GDP growth this quarter, after +19.3 points in Q3.

Foreign trade also continued its rebound and exports increased more than imports (+5.8% after +22.1% for exports, and +1.8% after +16.4% for imports). Overall, foreign trade made a positive contribution to GDP growth in Q4: +1.0 point, after +0.8 points in Q3 2020. Finally, changes in inventories also made a positive contribution to GDP growth (+0.4 points after –1.7 points).

The GDP growth estimate for Q4 2020 is revised downward by −0.1 points, and stood at −1,4%. Slight revisions in different aggregates offset each other; they are mainly due to the revision of indicators.

On annual average, GDP growth estimate is revised upward by 0.1 points, to −8,2% in 2020.