Macron crisis: France plunges into recession as economy shrinks at fastest rate since WWII
The INSEE official statistics agency said gross domestic product (GDP) in France shrank by a huge 5.8 percent in the first quarter compared to the final three months of 2019. This follows a slight slump of 0.1 percent during that period, but marks the second consecutive quarterly contraction, meaning France is technically now in recession. The contraction in the first three months of this year was the biggest quarterly slump since records began in 1949.
It surpassed the record of 5.3 percent in the second quarter of 1968, when France was ravaged by civil unrest, mass student protests and general strikes.
The latest alarming slump even exceeded most economists’ forecasts, with a Reuters poll predicting on average a contraction of 3.5 percent, although some estimates went as low as seven percent.
The INSEEE data shows consumer spending – predominantly the driver for the French economy – collapsed 6.1 percent in the first quarter compared to the previous three months, while investment plummeted by a massive 11.4 percent.
Exports and imports fells 6.5 percent and 5.9 percent respectively during the three month period.
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INSEE said in its quarterly report the slump is “primarily linked to the shut-down of non-essential activities in the context of the implementation of the lockdown since mid-March”.
France has been in lockdown since March 17, with the country’s 67 million people ordered to stay at home and only go out to buy food, go to work, seek medical care or to get exercise on their own.
Earlier this week, Prime Minister Edouard Charles Philippe announced lockdown restriction will be start to be eased from May 11.
But the government has warned of a sharp upturn in unemployment and bankruptcies as the true impacts of the coronavirus lockdown start to become clear.
INSEE has previously estimated economic activity is at about two-thirds of normal levels.
More than half of private sector workers have been put on state-subsidised furloughs aimed at staving off permanent mass layoffs.
This is the first major financial blow to the European Union as a result of continent-wide coronavirus lockdown.
France is the bloc’s second biggest economy, valued at a huge £2.2trillion in 2019, according to statistics from the International Monetary Fund, and seventh largest in the world, behind the likes of the US, China, Germany and the UK.
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The French economic slump will spark fears Angela Merkel will see the German economy – the biggest in the EU at £3.2trillion – experience a similar disastrous slump.
This could trigger a massive collapse in European economies, with Spain and Italy – the two EU countries hit hardest by coronavirus cases and deaths.
Spain’s GDP also slumped 5.2 percent in the first quarter compared to the final three months of last year – the country’s worst contraction since the current data started in 1995.
The French slump comes just hours before first quarter figures for GDP in the eurozone are revealed, which are expected to make extremely grim reading.
This is also the latest blow to the world economy, and comes less than 24 hours after the US sparked fresh disastrous recession fears.
The Commerce Department’s latest report showed the world’s largest economy slumped 4.8 percent in the first quarter of this year.
The fall in GDP marked the first economic contraction in the US in six years, with economic forecasts warning of far worse to come in the April to June period, as the true impact on consumers and businesses from the current lockdown become evident.
The Congressional Budget Office has even estimated that GDP will plunge by a massive 40 percent year-on-year in this quarter, which would be the bleakest three-month period since such records were first compiled in 1947.
More than 26 million people in the US have filed for jobless benefits in just five weeks, with millions more expected to follow later on Thursday when updated figures are released.
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