Having followed the epidemiological curve for a year and a half, French economic activity shifted away from this profile this summer as a result of the vaccination campaign. The totally unanticipated nature of this crisis, combined with the scale of the emergency and support measures put in place, contributed to its uniqueness: a recession that was certainly unprecedented in its intensity, but during which income and the productive fabric were largely protected, safeguarding the potential for a rebound in the economy.

Specifically, the shock wave was very well cushioned in terms of the labour market, with payroll employment exceeding its pre-crisis level from Q2 2021 onwards. The pace of job creations is likely to slow a little towards the end of the year, but all in all about 500,000 net salaried job creations are expected, after the 300,000 net destructions recorded in 2020. The active population should be back to its trend trajectory by the end of 2021 and the unemployment rate is expected to drop sharply from Q3 onwards, to 7.6%, or almost one point less than two years earlier. At the same time, economic activity overall is expected to return to its pre-crisis level by the end of year, but unlike employment it is unlikely to exceed it. Apparent labour productivity at the end of 2021 is therefore likely to remain below its Q4 2019 level, despite the return of short-time working to its normal level. It is difficult at this stage to determine whether or not this decline will be long-lasting, as it could be offset by the sectoral reallocation of jobs and the increased adoption of digital technologies.

The good performance of employment is expected to help support the purchasing power of households’ gross disposable income. Measured in consumption units, this is nevertheless likely to remain at a standstill in Q3 with the effect of inflation and despite the buoyancy of earned income, before rebounding at the end of the year. As an annual average, purchasing power per consumption unit looks set to increase by 1.5% in 2021 (after stability in 2020). On the corporate side, the margin rate settled at a particularly high level at the start of 2021, as a result of the combined effect of support measures introduced to cope with the crisis and the reduction in taxes on production. It is expected to fall back in H2, but by the end of the year it will probably be slightly above its 2018 average (as 2019 saw the switch from the CICE to lower contributions, resulting in a “double payment” in that year in accounting terms).

As has been the case since the start of the crisis, the granularity of observations is of considerable importance. On a month-by-month basis, acceleration in economic activity was strongest in May-June, with the effect of the reopening of businesses. As a quarterly average, however, this acceleration will in fact appear in Q3 (+2.7% forecast), before a slowdown late in the year (+0.5% forecast in Q4). Similarly, the sharp decline in the unemployment rate (measured as a quarterly average) expected for Q3 2021 owes a great deal to the acceleration in employment measured between March and June.

As an annual average, the forecast for growth in 2021 (around +6¼%, after –8.0% in 2020) therefore remains unchanged compared to the previous Economic Outlook. Nevertheless, the probable picture of the economy at the end of 2021 is beginning to take shape, based on the latest available short-term indicators (“hard” data, business tendency surveys, high frequency data). At this stage, we continue to compare the situation forecast for the end of 2021 to that measured precrisis two years earlier, although obviously this measurement will gradually lose its relevance if the recovery continues. At a time when the economy is generally returning to its pre-crisis level, it should also be remembered that Q4 2019, taken as a benchmark for comparisons, also had a few peculiarities, and that if there had been no crisis, the economy would probably have grown at its trend pace over those two years.

Like employment, corporate investment reflects the unprecedented nature of the crisis, exceeding its Q4 2019 level by spring 2021, after falling less than expected given its usual determinants. The unanticipated nature of the crisis, the favourable financial conditions, support measures and composition effects probably account for this resistance. In H2, investment looks set to slow but it should nevertheless be more than 3% above its pre-crisis level. Household consumption picked up sharply in May-June, with the gradual lifting of health restrictions. An analysis of aggregated CB bank card transaction amounts suggests that it held up relatively well during the summer (at 2% below its pre-crisis level), although it did not shoot up. By the end of the year, it is expected that consumption will manage to return to its level of two years earlier. After increasing sharply at the height of the crisis, the savings ratio is likely to decline substantially. In Q4 2021, however, it looks set to remain above its 2019 level.

The contribution of foreign trade to change in GDP is likely to remain negative throughout the whole of 2021. Imports are expected to follow the dynamics of consumption, returning to a level very close to that of Q4 2019 by the end of the year. At the same time, however, exports look set to continue to lag behind (at 7% below their pre-crisis level) despite their rebound, as they are still affected by international tourism and aeronautics.

Sectoral contrasts certainly seem likely to persist into H2. Industry is expected to grow only slowly: it is probable that some branches, the automobile industry in particular, will still be penalised by acute sourcing difficulties. In services, activity should increase at trend rate in those branches that have already exceeded their pre-crisis level (information communication, services to businesses). But it is expected to remain below this level in accommodation-catering, leisure and transport, where some factors have a longer-lasting effect on demand (uneven recovery in international tourism and business travel, more frequent use of teleworking, etc.).

As autumn begins, the international environment appears more uncertain than during the summer. Notably, the Chinese and United States economies, which had rebounded ahead of Europe, now seem to be slowing. The speed of the recovery, spurred on by factors like the massive budget support measures in the United States, caused severe sourcing pressures, with the result that it was difficult to disentangle the global knock-on effects of this stimulus package and, conversely, its contribution to the problems. China, meanwhile, is facing renewed outbreaks of the epidemic and electricity shortages which hamper the country’s industrial production and increase risks to global supply chains. Against this backdrop, energy and commodity prices soared in H1. Energy prices quickly impacted on inflation, which in France reached 2.1% year-on-year in September: the outlook survey of households suggests that for several months residents in rural areas, who are more dependent on their cars for their journeys, have felt the rise in inflation rather more than those living in urban areas. For the moment, the prices of other commodities are mainly affecting production prices, where the year-on-year increase is now into double figures: around +10% for production prices in industry and in the agricultural sector.

Assuming price stability until the end of the year, inflation in France looks set to remain a little above 2% until December. This would be imported inflation for the most part: if there were to be any “second round” effects via wages, these would not show up until after our forecasting period. Such effects cannot be excluded, however, even though at this stage the signals sent out by the survey data remain moderate.

The forecasts given in this Economic Outlook are based on the assumption that there will be no new health restrictions, nor any further worsening of supply pressures. Sourcing difficulties (particularly high in Germany) and, to a lesser extent in the short term, problems related to workforce shortages (exacerbated in the United Kingdom by the effect of Brexit, for example) are just some of the uncertainties that may affect this scenario. Conversely, if the rebound in consumption were to continue or even increase, this could result in a more vigorous recovery than forecast, especially if it were accompanied by a rapid reduction in sourcing difficulties.