Illustration on household consumption – P.MAGNIEN / 20 MINUTES
The French economy is officially in recession and contracted by 5.8% in the first quarter, mainly due to the
containment in place since mid-March to stem the pandemic of
Covid-19, according to a first estimate unveiled this Thursday by the
Insee.
This is the largest decline in the history of quarterly GDP assessments started in 1949, and far exceeds the declines in the first quarter of 2009 (-1.6%) or the second quarter of 1968 (-5 , 3%), specifies INSEE. After the 0.1% drop in French gross domestic product (GDP) recorded in the last quarter of 2019, this performance confirms that France has indeed entered into recession.
“Unprecedented” drop in household spending
This drop in activity “is mainly linked to the cessation of” nonessential “activities in the context of the implementation of containment from mid-March”, explains the National Institute of Statistics in its publication . This assessment is in line with that of the Banque de France, published in early April, which estimated the contraction of GDP at around 6% in the first quarter. Household spending fell “unprecedented” by -6.1%, while many shops, restaurants and cafes were closed by government decision, according to INSEE.
Business investment also fell sharply by -11.8%. Overall, domestic demand thus contributed -6.6 points to the decline in GDP during the past quarter. The first illustration of the economic crisis from the start of the epidemic, foreign trade was also down: -6.5% for exports and -5.9% for imports. Ultimately, it contributes negatively (-0.2 point) to the decline in GDP. Conversely, inventory changes contributed positively, up +0.9 points.
Historical fall in household consumption
Another indicator, consumer spending by French households fell 17.9% in March compared to the previous month, the largest monthly decline since the start of the series in 1980, said INSEE on Thursday. Consumption of manufactured goods fell sharply (-42.3% after -0.6% in February) and energy expenditure fell sharply (-11.4% after -0.9%). Only food consumption has increased significantly (+ 7.8% after -0.1%), the institute details in a press release. Consumer price increases also continued to slow in April, dropping to 0.4% year-on-year from 0.7% in March, despite rising food prices.
After containment came into effect on March 17, which had caused a sharp drop in inflation last month, the fall in energy prices continued in April, accompanied by a “sharp slowdown in prices services ”, noted the Institute in a press release. On the other hand, food prices “would be much more dynamic over a year than in March”, estimated the INSEE, which specifies however that the coronavirus health crisis “affected the quality of the data for April ” Over one month, consumer prices rose 0.1%, as in March, with a sharp rebound in food products “linked to the sharp increase in those of fresh products”. Energy prices, on the other hand, would “fall further, in the wake of petroleum product prices.”
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