The French economy is operating at 65% of its capacities at the end of March. INSEE shows the importance of a containment of limited duration

INSEE published the note we were all waiting for. The statistical institute gives a measure of the impact of the crisis on the level of activity. The French economy would evolve at 65% of its capacity during the last week of March.

The INSEE analysis confirms the point observed in the Markit surveys: the downward adjustment of activity is mainly noticed in the services sector and not in industry. This does not prevent industrial companies from being very worried about their outlook.
The business climate indicator (survey carried out on the first part of the month) is down 10 points, falling well below its historic average. This is the services Sector that is decreasing the most and in particular the distribution sector. In contrast, the industry survey has only a limited setback. This does not mean that the crisis will be painless. The prospects for activity are poor. The adjustment is coming.

By taking these surveys and other data, INSEE estimates that the French economy is, at the end of March, 35% below its normal level.
If the containment and the extent of this decline were to continue for one month, then the impact on the annual evolution of GDP would be -3% and -6% if the lockdown lasted two months. This highlights the need to implement measures to limit contagion. Effective containment, and that’s everyone’s business, will help reduce the magnitude of the downturn. We would all benefit of this.

In the face of this rapid decline in activity, employment has declined sharply. The French government has decided to pay the cost of this shock on the labor market. It will pay for the unemployment linked with this epidemic crisis. As the shock is anticipated as temporary this measure will avoid higher costs associated with the adjustment on the labor market during the recovery.

At the same time, household consumption is currently down 35%, particularly on industrial goods.

State of play at the end of March.