According to the estimates of the INSEE official statistics agency published earlier this week, there can be a contraction of up to 20 per cent in the second quarter compared to the previous three months for the French economy as the countrywide lockdown is being slowly lifted in the country.
If the estimates of the contraction turn out to be true, that would mark a steep drop for the French economy and its recession after the economy contracted by 5.8 per cent in the first quarter of the current year. France is the second largest economy of the euro zone.
According to the predictions of the INSEE, on the overall the French economy could contract by as much as 8 per cent for the whole of 2020 if the economic activity managed to return to levels before the crisis by the month of July – which the body feels is quite unlikely.
After the nationwide lockdown, imposed to control the spread of the novel coronavirus pandemic was put i place from mid-March and was lifted on May 11, the economic activities in France has been running at 21 per cent below normal levels, the INSEE estimated. In Early May, the economic activity was down by 33 per cent of normal.
One of the encouraging aspects however was the low drop in consumer spending in the country which was estimated to be down by only 6 per cent below normal levels as most of the stores in the country were allowed to reopen after the almost two month long lockdown. That was a sharp increase from the 33 per cent drop in the numbers as was witnessed in early May.
Consumer confidence however continued to deteriorate in mat, found a monthly survey from INSEE. That dropped to its lowest level since January 2019 when there were continued and country wide anti-government protests which hampered business activities.
The survey also found that the concerns of households about the general economy remained at the same levels in May that were not witnessed since the survey began in 1972. The survey also found that the fear of losing out on employment was also at its highest since the 2009 global financial crisis.
At the same time however, there was an improvement in business confidence compared to the record lows that the matrix had reached in April. That number however was still at deeply depressed levels as showed in a separate monthly survey from INSEE.
(Adapted from FinancialPost.com)