In July and August 2021, the health situation deteriorated in France: circulation of the Delta variant of Covid-19 increased, resulting in a fourth wave of the epidemic. However, containing the epidemic now relies mainly on rolling out vaccination coverage, which greatly reduces the economic impact of the virus. In July and August 2021 therefore, economic activity overall would seem to have continued to grow, and is now relatively close to its pre-crisis level: between –1 and –0.5% compared to Q4 2019, against about –30% in April 2020 (first wave), –7% in November 2021 (second wave), and –6% in April 2021 (third wave).

Both high-frequency indicators and business tendency surveys suggest that recovery continued during the summer, despite the surge in the Delta variant. Admittedly, household consumption in July would appear to have decreased slightly, standing at –2% below its pre-crisis level, after –1% in June (but against –12% in April 2021): after a strong rebound in May-June, purchases of goods weakened, despite the summer sales; however, at the same time, spending continued to pick up in services that had previously been closed or subject to severe restrictions (accommodation-catering, transport, leisure activities). Then in August, consumption of goods would appear to have picked up, with the introduction of the ‘health pass’ affecting the sectors concerned only moderately, with the result that all in all, household consumption would appear to have reached –1½% below its pre-crisis level.

These estimates are based mainly on detailed day-to-day analysis of CB bank card transaction amounts. These data suggest that the health pass would seem to have had a temporary impact on some leisure activities, a moderate and again probably temporary impact on restaurants, and no impact on transport. These effects, when detectable, are nevertheless in no way comparable to the dramatic fall in activity recorded during the previous waves of the epidemic, which gives an idea of the counterfactual situation (i.e. of what economic activity would have been this summer without vaccination and its associated containment measures). Furthermore, consumption in accommodation-catering for Q3 2021 is estimated to be higher than in summer 2020, although still below its pre-crisis level.

Since the publication of the last Economic Outlook on 1^st July, the results for the Q2 2021 national accounts have been published. As a result, economic activity at the end of 2020 and the beginning of 2021 have been revised upwards slightly, mainly in relation to the construction sector: from Q1 2021, corporate investment returned to its pre-crisis level. And the rebound in May-June, after the third lockdown, was a little more pronounced than expected, with activity in June at about 1% below its pre-crisis level. By mid-year, therefore, the growth overhang for 2021 stood at 4.8% (this is what annual growth would be, assuming that GDP in Q3 and Q4 remains at the Q2 average) or even 5.9% (by replacing the Q2 average in this calculation with the higher level estimated for June alone).

Taking into account the activity indicators for July and August as well as the sharp acceleration measured in May and then in June, growth in Q3 is expected to be strong (+2.7% forecast compared to Q2), even though it may slow a little from month to month: in fact it was in May and June, when businesses reopened, that activity would appear to have picked up most significantly. Provided there is no further deterioration in the health situation, the recovery looks set to continue to the end of the year (+0.5% forecast for Q4), thus allowing the economy to return to its pre-crisis level overall, despite persistent sectoral differences. All in all, growth as an annual average is likely to be 6¼% in 2021 (after –8.0% in 2020).

This forecast could possibly be improved on if, for example, certain limiting factors (especially sourcing difficulties) were to decrease in the coming months. Conversely, the end of the year is not without its uncertainties, especially at international level. In China, the health situation and the associated restrictive measures continue to cause concern, and economic activity is slowing. In the United States too, where economic activity returned to its pre-crisis level in spring 2021, the health situation is tending to deteriorate while inflationary pressures persist after the dynamic budget stimulus package applied in recent months. In Europe, concerns seem to be less at this stage, even though business climates –which remain favourable– are also tending to slow, in part automatically after the surge linked to the reopening of businesses.

The global recovery has been accompanied by supply pressures and a simultaneous rise in commodity prices. Some of these pressures seem to be stabilising, as suggested, for example, by the August business outlook survey of building construction, but they remain considerable. Production prices are suffering the effects –in addition to the base effect of their relative weakness in 2020– and production itself is sometimes limited by a shortage of inputs. In July 2021, production prices in French industry, like agricultural production prices, increased by about 8% year-on-year. Concerning services, production prices in maritime and coastal freight transport increased very sharply due to the sustained increase in demand. Finally, in construction, the cost of some materials increased sharply. On the production side, the share of companies reporting that they were limited by sourcing difficulties reached a high point in a number of branches in July compared to previous years, according to the business tendency surveys. For example, automobile production fell back sharply in H1, affected by the world shortage of electronic components.

These pressures are likely to fuel inflation, at least temporarily, especially in the United States but also in Europe. In France, it was more specifically the rise in energy prices that caused inflation to rebound in H1 2021. Inflation in July and August was then affected by the scheduling of the summer sales, which were adjusted in 2020 and 2021 because of the pandemic. For the end of the year, the main scenario at the moment is still similar to that published in the Economic Outlook at the beginning of July: inflation could soon rise a little above 2% year-on-year, at least from time to time. At this stage, the survey data are sending out only moderate signals on wage increases and possible “second-round” effects: the balance of opinion on the general prospects for wages in industry certainly rebounded, but in July it returned to its pre-crisis level, which was itself lower than that measured in 2018 and the start of 2019.

At the same time, however, recruitment difficulties are on the increase. When interviewed in July for the business tendency surveys, about 15% of companies in industry and services and 40% in building said that their production was restricted due to staff shortages. Nevertheless, these relatively high proportions are lower than the high points of 2018-2019. They go hand in hand with the buoyancy in private payroll employment in Q2, which returned to its pre-crisis level in June, earlier than forecast in the last Economic Outlook. The quarterly employment statistics usually relate to the last month of the quarter, thus it is the level of activity for June that can be compared to this result (much closer to the pre-crisis level than the Q2 2021 average), although any interpretation of the link between activity and employment was largely blurred during the crisis due to the unprecedented scale of the use of short-time working. In fact, the month by month estimate for the volume of paid hours gives a better picture than employment of the dynamism of activity; it confirms the scale of the short-time working scheme, which, especially in H1 2021, accounted for almost all of the difference in paid hours compared to 2019. This difference was considerably reduced in June 2021 (a decrease in paid hours of less than 1% compared to June 2019). All in all, while per capita productivity has been difficult to interpret for the last year and a half, hourly labour productivity seems to have been affected relatively little by the crisis.