French activity data has been ugly but that's not really a surprise - it's always better when data doesn't disappoint. 1Q20 GDP data and first growth estimates for 2Q20 should not drive more, but less pessimism about the French economy.

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1Q20 growth figures slightly less awful than announced

In France, GDP figures for the first quarter confirmed the first estimates of the economic contraction during the Coronavirus crisis.

A drop-in activity of around 35% (including a 32% drop in industrial activity) during the last two weeks of March led to a contraction of 5.3% QoQ non-annualized in the first quarter.

Details show that it is domestic demand that will have weighed the most on growth, with the -6.1% QoQ drop in exports being offset by the sharp drop in imports. Private consumption contracted by 5.6% and investment by 10.5% QoQ non-annualized.

These historically poor figures will nevertheless be dwarfed by second-quarter figures, which are expected to be at least twice as bad.

French economy is 4.8% smaller than it was a year ago

Source: Bloomberg, INSEE

Despite fears of unemployment

However, these figures are encouraging in light of the consumer confidence, which remained low in May, and fears of unemployment, which limit consumers’ purchasing intentions, especially for the most vulnerable.

The figures published yesterday showed a historic increase in the number of unemployed, up by 827,000 people, or just over a million in total since February. In 2008, it took more than four years to reach this figure.

Temporary workers, very short-term contracts and interim workers paid a heavy price and accounted for almost three-quarters of the increase. From this point of view, the business surveys published this week showed a very strong recovery in hiring intentions for temporary workers, which should de facto limit the spectacular rebound in unemployment over time.

We are still expecting an increase of around 600,000 unemployed people at the end of the year, with the unemployment rate 1.5pp higher than in December, at 10%.