France GDP Logs Double-Digit Contraction In Q2

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The French economy logged a double-digit contraction in the second quarter due to the shut-down of "non-essential" activities as part of the lockdown implemented to battle the coronavirus pandemic until the start of May, first estimate from the statistical office Insee showed Friday.

Gross domestic product fell by a record 13.8 percent sequentially, following the first quarter's 5.9 percent decrease. Economic output was 19 percent lower than in the second quarter of 2019.

This was also bigger than Germany's 10.1 percent fall. Economists had forecast France GDP to decline 15.3 percent sequentially in the second quarter.

The statistical office said the gradual ending of restrictions to curb the spread of Covid-19 led to a gradual recovery of economic activity in May and June, after the low point reached in April.

The expenditure-side breakdown of GDP showed that household spending plunged 11 percent after a 5.8 percent drop in the first quarter.

The decline in total gross fixed capital formation was more pronounced, which fell 17.8 percent, following a 10.3 percent decline in the preceding period.

General government expenditure slid 8.0 percent versus a 3.5 percent drop a quarter ago. Overall, final domestic demand excluding inventory changes contributed to -12.0 points to GDP growth.

At the same time, exports fell 25.5 percent, bigger than the 6.1 percent decrease a quarter ago. Likewise, fall in imports deepened to 17.3 percent from 5.5 percent. All in all, the foreign trade balance contributed negatively to GDP growth by -2.3 points.

Early this month, Insee had forecast the second largest euro area economy to rebound about 19 percent in the third quarter and grow 3 percent in the fourth quarter.

According to the Summer Forecast, released by the European Commission this month, France's GDP will shrink 10.6 percent this year. The economic recovery will remain on track in 2021, with GDP expanding 7.6 percent, EU said.

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