Forecasts predicted the devastating effect of the Covid-19 epidemic and containment on the economy. The disaster is confirmed with the publication, Thursday, April 30 by INSEE, of the first estimates of growth in the first quarter.
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Over the first three months of 2020, GDP fell 5.8%. A historic shock that will continue and even increase because these first statistics only record the effect of the first two weeks of the containment started in mid-March.
► Record decline since 1949
In memory of INSEE statisticians, the brutality of the recession is unprecedented. No precedent has existed for such a quarterly decline since INSEE published these quarterly statistics, in 1949.
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With a collapse of 5.8%, the first quarter of 2020 was therefore much worse than the first quarter of 2009, the start of the last major crisis, where the decline had reached “only” 1.6%. The only possible comparison is rather to look for May 68. The massive strikes and the student revolt had then led to a fall in GDP of 5.3% in the third quarter, followed by a fairly rapid rebound during the end of the ‘year.
► Second quarter figures will be worse
Historical, the 5.8% drop in GDP in the past quarter only takes into account 11 working days of confinement. According to various estimates, from INSEE or other economic research institutes, a month of confinement effectively puts a good third of the economy down.
The figures for the next quarter will therefore be much worse since this time they will reflect the effects of six weeks of sleep for a large part of the economy followed by a recovery which can only be very gradual.
For Denis Ferrand, Director General of the Rexecode Institute, a quick calculation “On a corner of the table” now allows to estimate the disaster to come: “If the strict containment lasts until May 11 and if its economic impact is halved until the end of the quarter”, then the decline in GDP could reach “20.1% in the second quarter”.
Under these conditions, we would have to hope for a strong rebound over the last two quarters in order to succeed in limiting losses over the whole of 2020. In these latest forecasts, the government expects a drop in GDP of 8% at the end of the year.
► Power consumption down
Figures from the first quarter of INSEE show that household consumption, the main engine of growth in France, has stifled with the introduction of containment. In March, only food pulled out of the game a little. Driven by precautionary purchases at the start of confinement, food expenditure rose 7.8%.
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For all the rest, it’s Bérézina. Purchases of durable goods, automobiles or furniture, fell by 48%. Clothing more than 50%. All in all, this works out according to INSEE “An unprecedented drop in household consumption” more than 6% for the entire quarter.
► Investment at half mast
The plunge is just as marked on the corporate side. They see their investments fall by 11% over the quarter. The fall is particularly severe in construction (−13.8%), penalized by “The stoppage of worksites during the second half of March”.
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These first statistics since containment also illustrate the brake on world trade. In the first quarter, French exports as well as imports fell by around 6%.