France: A Wave Of Pessimism

The strict lockdown in France has led to a sharp deterioration in the business climate in November, confirming our expectation of a significant decline in the fourth quarter.

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Wave of pessimism among business leaders

The second lockdown led to a sharp deterioration in the business climate in November, with the composite index standing at 79 compared with 90 in October, erasing the recovery seen in the summer and returning to the level observed in June 2020.

Given the current lockdown is less stringent than the lockdown in the spring, the business climate indicator didn't deteriorate as much as in April (when it had reached the low point of 54). Nevertheless, the current wave of pessimism concerns all sectors, including industry, where the indicator fell to 92 against 94 in October, even though the sector isn't affected by the current lockdown. The opinion of French industrialists on production prospects is deteriorating sharply, while order books are slightly on the rise, but still below their pre-crisis levels.

Pessimism is hitting those sectors the hardest that have been most affected by the current lockdown (accommodation and catering, specialized retail trade, motor vehicle trade, and repair) due in particular to the closure since 30 October of all restaurants, bars, and non-essential shops. The business climate in the retail trade has contracted sharply to reach 72 compared with 95 in October. This 23-point drop is nonetheless slightly less sharp than that observed in April during the first lockdown (30 points). In the services sector, the indicator fell to 77 against 89 the previous month and the deterioration is visible in all sub-sectors.

Furthermore, the overall employment outlook in France continues to deteriorate, losing six points in one month (from 89 to 83), mainly in the service sector, but also in the industrial sector. 

The French economy is suffering more than its European neighbors

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