French Economy Shrinks Most Since WW II
The French economy shrank the most since World War II in the first quarter, and the outlook for the rest of the year is souring significantly amid the confinement to limit the spread of the coronavirus, according to the Bank of France.
The central bank’s estimate of a 6% slump is the latest indicator of the severity of the shock to European economies from a simultaneous collapse in demand and supply. Such a GDP drop from one quarter to the next would be comparable only to the 5.3% recorded around the strikes of May 1968.
Like the country’s statistics agency Insee, the Bank of France had to change its way of measuring to try to get a grasp on the tumult. It used high-frequency data -- including card transactions and requests for unemployment benefits -- to corroborate the results of its monthly survey of 8,500 businesses.
In industry, the sharpest declines in activity were in the automotive and machine-making sectors, while hotels and restaurants were the hardest hit in services. Overall, the central bank said the loss of activity in one week of confinement is around 32%. Insee had estimated 35%.
The Bank of France survey also showed that factories are running at just 56% of capacity -- a record low -- down from 78% in February.
That loss of activity means that for every two weeks of confinement, 2020 GDP will be 1.5% lower, the Bank of France said. But it cautioned not to extrapolate from that because the actual loss of output may be different as businesses and consumers adapt to a longer shutdown.
©2020 Bloomberg L.P.