France: Sharpest contraction ever recorded in Q1; economy enters recession
May 29, 2020
GDP shrank 5.3% on quarter-on-quarter seasonally-adjusted basis in the first quarter, down from Q4 2019’s 0.1% dip and marking the sharpest contraction on record.
Household spending fell to 5.6% in Q1, marking a record drop (Q4 2019: +0.3% quarter-on-quarter seasonally-adjusted). Public spending dropped 2.0% in Q1 (Q4 2019: +0.5% qoq s.a.). In addition, fixed investment plunged 10.5% in Q1, compared to the 0.1% expansion logged in the previous quarter.
Exports of goods and services fell 6.1% in the first quarter, down from Q4 2019’s 0.4% dip. Meanwhile, imports of goods and services declined 5.7% in Q1 (Q4 2019: -0.7% qoq s.a.). Taken together, the external sector made a neutral contribution to overall GDP in Q1, down from Q4 2019’s 0.1 percentage points contribution.
On an annual basis, economic activity dropped 5.0% in Q1, contrasting Q4 2019's 0.9% growth.
The economy will likely shrink this year, ravaged by Covid-19. Raising unemployment and social distancing measures should dampen private consumption, while heightened uncertainties over the length of the pandemic will likely curtail fixed investment. Moreover, the country’s fragile fiscal conditions are set to deteriorate further ahead.
Author: Nicolás J. Aguilar, Economist