France’s economy slumped a record 13.8 percent in the second quarter as businesses bore the brunt of a strict coronavirus lockdown that slammed consumer spending, the INSEE statistics agency said Friday.
The seasonally-adjusted drop in gross domestic product (GDP) from the first quarter was not as steep as many analysts had expected, but worse than the performance of most of France’s eurozone peers.
“GDP’s negative developments in first half of 2020 is linked to the shutdown of ‘non-essential’ activities in the context of the implementation of the lockdown between mid-March and the beginning of May,” the INSEE said in a statement.
The agency also revised the figure for the first quarter — when lockdowns just started to be implemented — to a 5.9-percent contraction from the 5.3 percent it had previously estimated.
The French economy has now shrunk for three consecutive quarters, a recession that analysts say is likely to persist even as spending begins to revive.
Household consumption, a main driver of the economy, tumbled 11 percent during the quarter.
“It’s still unclear how consumers are going to behave as unemployment rises in the coming months, and based on confidence surveys they seem eager to save,” said Julien Manceaux, an economist at ING bank.
France’s second-quarter contraction was much sharper than the record 10.1 percent fall in Germany, while Austria suffered a 10.7 percent decline and Belgium 12.2 percent.
Spain, however, recorded an 18.5 percent plunge in second-quarter GDP, reflecting one of the most stringent COVID-19 lockdowns in Europe which battered its key tourism industry.
France’s drop was better than the INSEE’s own forecast from mid-June of 17 percent and an analyst consensus established by Factset had called a 15.3-percent fall.
“While the catastrophic collapse in French Q2 GDP was hardly a shock given the country’s stringent lockdown, it still highlights the sheer extent of the economic damage wrought by the pandemic,” said Jessica Hinds at Capital Economics.
– ‘Not powerless’ –
France’s investment spending sank by 17.8 percent, while the lockdown and travel restrictions decimated the transportation (-46 percent) and restaurant and hotel (-57 percent) sectors.
The INSEE noted that overall “the gradual ending of restrictions led to a gradual recovery of economic activity in May and June, after the low point reached in April.”
Household spending on goods in particular rebounded sharply in June thanks to pent-up demand, with spending 2.3 percent higher than in February, before the business closures and stay-at-home orders were imposed.
The government has promised a 100 billion euro ($118 billion) recovery plan of spending and investments, having already spent at least 460 billion euros to limit the social and economic devastation.
Many employees are being paid by the state to help limit outright layoffs by companies hit hardest by the lockdowns.
“We are not powerless in the face of the crisis,” Finance Minister Bruno Le Maire said after the figures were released.
“We are going to fight to do better than the minus 11 percent” hit to GPD forecast for the full year, he added.