French economy plunges by almost 14% as Covid-19 lockdown takes its toll

France's economy contracted by a record 13.8% in the second quarter of 2020 under the impact of  the coronavirus lockdown, according to the national statistics institute INSEE.

French Finance Minister Bruno Le Maire attends a press conference after the weekly cabinet meeting, Wednesday June 10, 2020 in Paris. AP - Ludovic Marin

The seasonally-adjusted quarter-on-quarter drop in gross domestic product (GDP) was better than forecast but worse than the performance of most other eurozone countries.

"GDP's negative developments in first half of 2020 is linked to the shut-down of 'non-essential' activities in the context of the implementation of the lockdown between mid-March and the beginning of May," INSEE said in a statement.

INSEE also updated the figure for the first quarter -- when lockdowns had just begun to be implemented -- to an almost 6% contraction, from the 5.3% it had previously estimated.

Eurozone hit by recession

The second quarter figure means the French economy has been shrinking for three consecutive quarters and continues to be in recession.

France's second quarter contraction was much sharper than the record 10.1% fall in Germany. Austria suffered a 10.7% contraction and Belgium by just over 12%

Spain has recorded an even sharper 18.5% dive.

However, France's drop was better than INSEE's own forecast from mid-June of a 17% drop. The central bank had meanwhile estimated a 14% fall at the beginning of July.

Unsurprisingly given the lockdowns and travel restrictions hitting international tourism, there was a nearly 46% drop in transportation and a 57% drop in the restaurant and hotel sector.

Household spending boosts the economy

Domestic consumption, which is the main driver of the French economy, and household consumption fell by 11% during the quarter.

Investment fell by a greater amount -- almost 18%.

However, INSEE revealed today that household consumption for the month of June was stonger than pre-Covid 19 figures, most notably in spending on maunfactured goods. 

The June statistics were a significant 2.3% higher than spending in February. 

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."

Les chiffres annoncés par l'@InseeFr sont moins sévères que prévus. Nous devons redoubler d’efforts pour relancer l’activité économique en France. #PlanDeRelance pic.twitter.com/7BzmfxU6nN

— Bruno Le Maire (@BrunoLeMaire) July 31, 2020

Le Maire vows to persevere

Finance Minister Bruno Le Maire said after the figures were released: "We are not powerless in the face of the crisis." 

The French government has taken extraordinary measures to support businesses duing the crisis and keep people in pay even when there is little work.

The finance minister told C News TV on Friday that measures such as state aid for companies, and a decision not to raise taxes in order to encourage consumer spending could enable a pick-up later this year.

Le Maire added, "we are going to fight to do better than the minus 11 percent" forecast for the entire year by the government.