Today’s surveys show that any economic recovery in France remains distant

Today out focus shifts to the second largest economy in the Euro area as La Belle France takes centre stage. Let us open with the thoughts of the finance minister on the economic state of play.

PARIS (Reuters) – Recent economic indicators for France are satisfactory but too fragile to change the forecast for an 11% economic contraction this year, Bruno Le Maire said Thursday.

The Minister of the Economy, speaking to the National Assembly for the debate on the orientation of public finances for 2021, said he expected economic growth of 8% for France next year and expressed the will that the in 2022, activity returns to its levels preceding the crisis linked to the new coronavirus.

Only a politician could use the words “satisfactory” and “too fragile” in the same sentence and it is a grim one of a 11% decline in GDP ( Gross Domestic Product) for this year. This means that the expectations for France are worse than those for the Euro area as a whole.

The expectations of SPF respondents for euro area real GDP growth averaged -8.3%, 5.7% and 2.4% for 2020, 2021 and 2022, respectively. ( ECB 16th July)

So around 3% worse which is interesting and I note that there is a similar pattern of predicting most but far from all of it returning in 2021. That is what you call making a forecast that is like an each-way bet where if you do recover no-one will care and if you do worse than that you highlight you did not expect a full recovery. The truth is that none of us know how 2020 will finish let alone what will happen next year. Maybe the quote below suffers from translation from French but “expressed the will?”

expressed the will that the in 2022, activity returns to its levels preceding the crisis

What does that mean? So let us move on knowing 2020 will be bad with a likely double-digit fall in economic output.

Right Here, Right Now

This morning has brought the latest in the long-running official survey on the economy.

In July 2020, the business climate has continued its recovery started in May. The indicator that synthesizes it, calculated from the responses of business managers from the main market sectors, has gained 7 points. At 85, the business climate is however still significantly below its long-term average (100), and a fortiori below its relatively high pre-lockdown level (105).

The ending of the lockdown has seen a welcome rally of 7 points but sadly only to 85% of the long-term average. If we look back though I note it was recording a relatively high 105 which makes me mull this.

In Q1 2020, real gross domestic product (GDP)* fell sharply: -5.3% after -0.1% in Q4 2019, thus a revision of +0.5% compared with the first estimate published in April.

I think the relevant number is the contraction in the last quarter of 2019 and how does that relate to a relatively high reading. As the fall is only 0.1% we could argue the economy was flat lining but we still have a measure recording growth when there wasn’t any.

Going back to the survey we see a similar pattern but weaker number for employment.

In July 2020, the employment climate has continued to recover sharply from the April low. At 77, it has gained 10 points compared to June, but it still remains far below its pre-lockdown level.


The position here is particularly bad.

According to the business managers surveyed in July 2020, the business climate in industry has continued to improve. The composite indicator has gained 4 points compared to June, after losing 30 points in April due to the health crisis. However, at 82, it remains far below its long term average (100).

Looking ahead the order book does not look exactly auspicious either.

In July 2020, slightly fewer industrialists than in June have declared their order books to be below normal. The balances of opinion on total and foreign order books have very slightly recovered. Both stand at very low levels although slightly higher than in 2009.

If we look back this measure had a recent peak around 112 as 2018 began. This represented quite a rally compared to the dips below 90 seen at times in 2012 and 13. But after that peak it began slip-sliding away to around 100 and now well you can see above.


Whilst debt hits the headlines the breakdown of the GDP data shows that it is not the only thing going on.

At the same time, household consumption fell (-5.6% after +0.3%), resulting in a sharp rise of the saving rate to 19.6% after 15.1% in Q4 2019.

The pandemic has seen higher levels of saving which has two drivers I think. Firstly many simply could not spend their money as so many outlets closed. Next those who can look like they have been indulging in some precautionary saving which is something of a disaster for supporters of negative interest-rates.

National Debt

Having just looked at ying here is part of the yang.

In Q1 2020 the public deficit increased by 1.1 points: 4.8% of GDP after 3.7% in Q4 2019.

So we see that pandemic France was borrowing more and regular readers will have noted this from past articles. For the year as a whole France had its nose pressed against the Growth and Stability Pact threshold of 3% of GDP. I know some of you measure an economy by tax receipts so they were 1.275 trillion in 2019.

Moving to the national debt we see this.

At the end of Q1 2020, Maastricht’s debt reached €2,438.5 billion, a €58.4 billion increase in comparison to Q4 2019. It accounted for 101.2% of gross domestic product (GDP), 3.1 points higher than last quarter, the highest increase since Q2 2019.

Looking ahead this is the view of the Bank of France.

As a result of the wider deficit and the fall in GDP, government debt should rise substantially to 119% of GDP in 2020, from 98.1% in 2019, and should scarcely decline over the rest of the projection horizon. The average debt-to-GDP ratio for the euro area should also increase in parallel, but to a more limited extent (to 101% of GDP in 2022, easing to 100% by end-2022).


There are some familiar patterns of a sharp drop in economic output followed by plenty of rhetoric about a sharp recovery next year. However the surveys we have looked at show a very partial recovery so far so that the “V-shaped” hopium users find themselves singing along with Bonnie Tyler.

I was lost in France
In the fields the birds were singing
I was lost in France
And the day was just beginning

Switching to the mounting debt burden it is a clear issue in terms of capital and if you like the weight of the debt. Also estimates of economies at around 120% of GDP went spectacularly wrong in the Euro area crisis. But in terms of debt costs then with a ten-year yield of -0.19% France is often being paid to issue debt. Although care is needed because the ECB does not buy ultra long bonds ( 30 years is its limit) meaning that France has a fifty-year bond yield of 0,58%. We should not forget that even the latter is very cheap, especially in these circumstances.

Also there is this from the head of the ECB Christine Lagarde.

In my interview with @IgnatiusPost

, I explained that price stability and climate change are closely related. Consequently, we must take climate-related risks into account in our central banking activities.




19 thoughts on “Today’s surveys show that any economic recovery in France remains distant

  1. Unsatisfactorily, let’s afford these numbers the benefit of doubt with a 3% margin of error.

    Their scenario: 100 less 11% plus 8% = 96.12 (4% over 2 years).

    With 3% margin of error: 100 less 14% plus 5%= 90.30 (10 over 2 years).

    Sacre blue! What le f**k does vous propose to do Henri?

  2. It’s pretty obvious why France was so set against the “Frugal Four” & why Germany (for the sake of future support) backed France on Sunday.
    Remember, if we extend the EU Withdrawal agreement, then, as far as budgetary measures are concerned, we’re on the hook too.
    Thank our lucky stars we left.

      • The last person to commit such political suicide was Chamberlain, & at least he had a noble cause (buying us re-arming time).
        The politicians of today do not possess nobility.
        We’re out Dec 31st 23:00

    • Believe it or not , it wasn’t economics that drove it. France wants a federal Europe based roughly on a federal France model. It saw the opportunity to make progress with the covid situation and Transend in play. It spent months grinding down Germany to support it. The Dutch and the Scandis don’t really want it, but without the UK, they can’t stand in the way if Germany plays ball.
      Its a French play and they are winning. It is of course exactly what ‘England’ has been trying to stop for the last 3 centuries ( at least).

  3. Hello Shaun,

    About that “V” shaped recovery that eveyone is talking about – I just got a feeling that they have the graph upside down …….


  4. So how do we measure “climate change” then Christine? Oh I know, we’ll pay a load of academic green scientists to do some research and come up with papers that tell us what we want to hear.

    Why do I get the impression that climate change is being mentioned more and more often and that some time in the future it will be a criminal offence to deny climate change?

    • Well Kevin , a lot of climate change is politics and this Shaun will not enter into.

      However I’ll be intrested in any reader’s links to any site that has hard data on a doubling of atmospheric CO2 that lead to a decrease in temperature in the past.


      • Temp. plummeting whilst CO2 rising in the Jurassic.
        Temp leading CO2 in the Permian & Tertiary.
        Really, the only correlation between CO2 & Temp. is the outgassing of the sea due to temperature rise.

    • my 2nd reply is this ,

      As the CB’ers have frankly run out of ideas they are desperately fishing around for some reason for their existence and for being “relevant” for that matter .

      They have seen lots of people “worried ” over climate change, they know next to nothing about it but its a good tag . And it diverts gaze away from their appalling record on the economy – see it wasn’t us guv!


  5. I thought at first that after release from house arrest that France was doing the ‘return to something like normal’ quite well. It got kids back in school, which meant it could plan to stop paying most to sit on their bums. Life locally started to look and feel normal. Drinks in the bar, even live music at one or two. Then the health nazis led by Veran struck. Started testing 20-40 year olds , who unsurprisingly tested positive, no symptoms but how the pysop went back in action about the fear of the second coming. Then the mask nazis moved in and masks everywhere, some local ‘hitlers’ insisting on them in streets ( la Rochelle, Brittany). Incidentally they just want to scare the Parisiens away from their holidays.
    So now its definitely not ‘normal’ again. At this rate it will be a ‘L’ shaped recovery ( not the right word) at best. The test should not be for covid but for madness, and they should start with the ‘experts’ . People go mad in herds, and this pysop is keeping the madness in place, it takes a long time for individuals to regain sanity and they wont unless the pysop stops and there is no sign of that. And I suspect there won’t be until 4 November.
    By the way one piece of sanity has occured, the initial results from a govt enquiry is finding that many recorded deaths in care homes should not have been labelled covid-19, so the 30,000 French deaths is already being revised down to no more than 25,000. This is now officially well within a flu death range.

  6. Hello Shaun,

    re : Growth and Stability Pact

    If it’s not already on the cards, I suspect this pact will be changed , to 5% or what ever it takes….


    PS: after all it’s only money and they can print what they like , and they will, the Euro Project is sacred .

    • Hi Forbin

      It has been suspended in practice but not in theory as this from April suggests.

      “The debt ratio would stand at 115.2% of GDP at the end of 2020. Compared to the level of 98.7% of GDP presented in the Draft Budgetary Plan in the fall, the significant deterioration could be explained by the combined effect of the increase in the deficit of nearly 7 points and the downward revision of nominal GDP growth for more than 9 points.”

      The numbers are of course worse now. Some may think that the Pact gets ignored only when it affects France and Germany….

  7. Why are they always so surprised that people start to save more in bad times? It is the Paradox of Thrift, but it is likewise inevitable. It is then made worse by ZIRP, because people save more to cover a possible fall in the value of what they have already saved.
    As remarked above, they have run of ideas and yet, like answer to a conundrum in my family tree I have been investigating, the answer is sat there right in front of them
    House prices are falling and have a bit further to go, whatever they do, so why not put up rates on a good day to bury bad news (Jo Moore must wish she had trademarked that)?

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