In epidemiological terms, the scenario of a short-term epidemic that would be over by the summer now seems to be ruled out. After a lull, the virus is continuing to spread, both in France and in many other countries. In addition to the “protective measures” already in place, more restrictive containment measures which affect economic activity more directly (closure of bars, restaurants, gyms, etc.) are now targeting some local areas and some sectors specifically, more so than in the spring. Meanwhile, air passenger transport is still very hard hit, as it has been since the start of the health crisis.

In September, the continued improvement in the business climate in France was mainly due, in most sectors, to improvements in opinions on past production, while prospects for activity in the next three months fell back, according to the business leaders questioned in the business tendency surveys. In services in particular, the balance of opinion on future activity has not yet returned to its long-term average, whereas it has in industry.

Household confidence has not rebounded since last April. However, the indicator on which it is based remains higher than during the great recession of 2008-2009, although worries about unemployment are approaching similar levels. More and more households believe that this is a good time to save.

As has been the case since the beginning of the health crisis, economic activity in the coming months will be determined to a large extent by the way the epidemic evolves. However, by targeting protection measures more specifically, this should lessen their economic impact, especially compared to the general lockdown last spring. The signals for forecasting activity in Q4 2020 are only partial at this stage:

After the sharp rebound associated with the end of lockdown (+16% forecast for Q3, after –13.8% in Q2 and –5.9% in Q1), there is a possibility that economic activity could come to a standstill at the end of the year as the second wave of the epidemic takes effect. In a Q4 scenario where the most severely affected services (accommodation-catering, transport services, recreation and leisure activities) were to return to their level of activity of last June after a lull during the summer, and where investment were to remain at a similar level to that in Q3 as a result of a wait-and-see stance, growth at the end of the year would be zero.

In such a scenario, French GDP at the end of the year would still be at 5% below its pre-crisis level, the same as its average over the summer.

This autumn forecast reflects the great uncertainty surrounding the coming months. A long-term tightening of existing health restrictions could cause GDP to contract further in Q4. Conversely, if the health situation stabilises, the change in GDP could be positive by the end of the year.

For 2020 overall, the contraction forecast for GDP remains around –9%.

Around 840,000 jobs, including almost 730,000 in payroll employment, are likely to be lost in 2020. However, this sharp decline (of about –3% as an annual average) is expected to be much less marked than the drop in GDP, due both to the short-time working scheme, either one-off or longer-term, and to a workforce retention phenomenon on the part of some businesses which appear to be retaining a large proportion of their employees at this stage, despite a contraction of their activity.

The halo of unemployment increased considerably during lockdown, given the difficulties in looking for a job at this time, but it is likely to decline, offset by a sharp rise in unemployment in H2. The unemployment rate is expected to rise dramatically from Q3 onwards, reaching 9.7% by the end of the year.

Inflation is likely to be zero year-on-year in December, limited to half a percentage point as an annual average in 2020. Given the various income protection measures put in place, household purchasing power per consumption unit looks set to decline by “only” one point over 2020, bearing in mind that this macroeconomic figure aggregates some very different individual situations.

With the rebound in consumption – which may ease at the end of the year – the household savings ratio, which virtually doubled in Q2 (as a result of forced savings) is expected to return to around 17% in H2, a slightly higher level than before the crisis.

The impact of the crisis is closely dependent on the degree to which each sector of activity has been exposed to the restrictive health measures. This Note de Conjoncture highlights those sectors that were particularly badly affected.

In industry, the aeronautics sector contributed significantly to the fall in exports of manufactured goods. Overall, however, services were affected more than industry: notably, accommodation-catering, passenger transport and cultural activities, which represent in total, in their market part, around 8% of value added. They appear potentially to have suffered long-term consequences and in H2 it is likely that most job losses will be concentrated here.

In addition to these sectoral differences there were also regional differences. For example, while tourist activity by French residents this summer was able to return to or even exceed its level of the previous year in some coastal or less densely populated regions, the major cities were penalised as a result of the decline in spending by French tourists, combined with the significant drop in the number of foreign tourists.

The epidemic has clearly shaken up the situation between sectors of activity and between regions, but it is too soon to tell, given the continuing uncertainty, to what extent these sectoral or regional changes are likely to be long-lasting.