In several countries the national accounts for Q2 2020 have highlighted the severity of the economic shock associated with the health situation. However, without underplaying this situation, data collected since the lifting of lockdown show how quickly and to what extent the economy is recovering from this shock. In August, the French economy appears to have been operating at about 95% of its pre-crisis level. In other words, the country would seem to have already caught up five-sixths of the 30-GDP-point gap that separated it from its pre-crisis level at the lowest point of lockdown. The scale of the shock that was triggered by the health crisis was certainly unprecedented, but so was the scale of the public policies implemented to counter its economic effects, both immediately and in the longer term.

Figures for Q2 also reveal the scale of the support measures put in place. In France, when economic activity fell by almost 14% over the quarter, household income fell by “only” a little over 2%, supported by various measures, including the introduction of short-time working. Loss of income was absorbed for the most part by general government and businesses. In addition, from June onwards, household consumption of goods overtook its February level, undoubtedly due in part to the effect of purchases that could not be made during lockdown.

After this inevitable rebound phase, the French economy is approaching this new beginning like an engine that appears to be both held in check yet primed for action. This is certainly the case for many economies throughout the world: health restrictions may have been reduced, but they continue to weigh heavily on supply, while demand risks are being weakened as health and economic uncertainties persist. At the same time, monetary and fiscal policies are being used to provide massive support for economic activity.

On the health front, the scenario of a total loss of control over the epidemic, requiring measures as drastic as in March, seems unlikely. The experience amassed during the first wave should give us a better indication of how to live with the virus. However, although they have been reduced, some restrictions or constraints are still being imposed (social distancing, quarantine when entering some countries, etc.) and new ones put in place (wearing a mask), in a context where fears of a resurgence of the epidemic are currently more acute in Europe. Some of these restrictions may have significant and long-lasting impacts on some sectors, such as passenger air transport and the events sector.

Since the summer, the business tendency surveys have highlighted the risk of a significant demand shock. Many businesses fear the loss of their outlets. In industry, order books – especially orders from abroad – are being replenished only slowly. And household confidence in the economic situation remains lower than its pre-crisis level. The jump in savings recorded during lockdown may have contributed to supporting demand in the coming quarters, but whether they will be used is still uncertain at this time: these savings are not the result of an increase in income but are due to consumption being temporarily stopped, and may be transformed into precautionary savings. In addition, these forced savings are for the moment measured at macroeconomic level, but household situations can vary considerably.

Faced with this situation, massive support measures have been introduced in France and likewise in most countries. Monetary policies remain very accommodating throughout the world, and the same is true for fiscal policies. In France, after the measures implemented during lockdown, which aimed to preserve both the productive fabric and household income as much as possible, the stimulus package announced recently will affect both supply and demand, but these effects will be felt mainly after our forecasting period, which is limited to the end of 2020.

The figures for growth in Q3 should reflect the strength of the rebound associated with the first months after the lifting of lockdown, with double-digit growth (+17% forecast at this stage in France 1), given the very low level to which activity had fallen in the previous quarter. In the coming months, recovery is likely to be slower. By the end of the year, activity is expected to return to around 96% (+/–2%, or between 94% and 98%) of its pre-crisis level, assuming that health provisions remain stable.

All in all across 2020, we are maintaining the forecast originally published in July of a contraction in GDP of around 9%. The decline in GDP in Q2 was certainly less pronounced than originally expected, but the uncertainty linked to the health crisis is on the rise again, leading us to moderate the pace of growth expected as the recovery continues.

Given that the pace of annual growth forecast before lockdown was around +1%, the pandemic is expected to reduce the pace of annual GDP growth by around 10 points in 2020.

There were more than 700,000 payroll job losses in H1 2020. This represents a 2.3% decline in employment year-on-year in Q2 (against –18.9% for the year-on-year shift in GDP). This difference is largely due to the measures put in place to preserve jobs. At the start of lockdown, it was mainly temporary employment that suffered the heaviest losses, before rebounding once lockdown was lifted.

In H2, the rebound in activity is likely to result in a moderate rebound in employment in most sectors, except those hardest hit by the health crisis. All in all, payroll employment is expected to remain virtually stable in H2, but the unemployment rate is expected to rise sharply, after an artificial drop during lockdown when large numbers of unemployed people interrupted their job searches. It could be as high as about 9.5% of the active population by the end of the year. The halo of unemployment, which jumped in Q2, is expected to decline in H2, but at the end of 2020 it could still be higher than its level at the end of 2019.

1. All of these forecasts are based on the first set of “hard” data available for the beginning of the summer (mainly July), and on the results from various business tendency surveys, including the ACEMO-Covid survey carried out by DARES in association with INSEE. As in the previous Points de Conjoncture, we also use a certain number of high-frequency indicators. However, when these are only available for 2020 (e.g. mobility indices calculated from search engines), they cannot be properly analysed due to the seasonal factor of holidays. However, by using those indicators that have a little more historical depth (with data available at least from 2019), year-on-year change can be calculated, with seasonal variations taken into account. This is the case, for example, with aggregated amounts from bank card transactions, which are used to estimate household consumption in “real time”.