Unsurprisingly, after two months of confinement, the economic indicators are red. According to data published on Friday, INSEE, household consumption collapsed in April and gross domestic product (GDP) registered in the first quarter a fall comparable to that recorded in the second quarter of 1968, marked by the massive strikes in May.
• Household consumption collapsed in April
In April, the French were confined for the entire month due to the coronavirus pandemic, while confinement was only in place during the second half of March. Result: household consumption dropped by a third (33.7%) compared to February, and by 20.2% compared to March. Compared with April 2019, household consumption also fell by more than a third (34.1%) last month.
In detail, it is the consumption of manufactured goods which falls most heavily, from 42.6% between March and April after 42.1% between February and March. Compared with April 2019, this consumption fell by two thirds (66.6%) last month. Confined households took advantage of the drop in oil prices and their fewer trips to reduce their energy expenses: they fell 22.8% in one month and 33.2% in one year.
Food consumption, which jumped 9.2% a month in March when the French stored basic foodstuffs at the start of containment, fell 5.4% in April. Over one year, however, it continues to register an increase last month, of 2.3%.
• Inflation slows in May
The increase in consumer prices slowed to 0.2% year on year in May, according to provisional data collected by the National Institute of Statistics. This downturn is linked to the " steep decline in the prices of energy and manufactured products ", explains INSEE. It is also the result of " a slowdown in food prices ", while consumer prices remain stable over a month.
• GDP fell 5.3% in the first quarter
Gross domestic product (GDP) fell by -5.3% in the first quarter, according to INSEE, which had anticipated in a previous estimate a drop of 5.8%. This indicator unsurprisingly confirms France's entry into recession in the first quarter, after the -0.1% decline in activity in the last quarter of 2019. Such a fall had been recorded in the second quarter of 1968, marked by the massive strikes in May.
In detail, household consumption expenditure recorded an “ unprecedented drop ” of -5.6%, linked to the closings of many businesses. Same thing on the corporate side, with an investment plunging -10.5%. This domestic demand at half mast contributes to lowering GDP by 6 points during the first quarter.
Not surprisingly, household disposable income fell slightly (-0.1%) in this first quarter. If the wages received have fallen with the use of the partial unemployment scheme, this has been “ offset by a sharp acceleration of social benefits in cash ”, explains in particular the INSEE. However, the massive intervention of the State made it possible to limit the loss of purchasing power to -0.4%, notes INSEE again. Households also favored savings during this first quarter, with a savings rate which increased to 19.6%, compared to 15.1% in the last quarter of 2019.
As a result of this decline in activity and the measures taken to support businesses and employees, the public deficit deteriorated " sharply " in the first quarter. The general government financing need increased by 1.1 points to 4.8% of GDP, compared to 3.7% in the last quarter of 2019.