PARIS (Reuters) – France’s economy contracted less than initially thought in the first quarter but it still plunged deep into recession and the worst is yet to come, official data showed on Friday.
The euro zone’s second biggest-economy shrank 5.3% in the first three months of the year from the previous quarter, the INSEE official stats agency said, revising its initial estimate of a 5.8% fall.
It was France’s deepest quarterly slump since 1968, when the country was gripped by civil unrest, mass student protests and general strikes.
The economy already shrank 0.1% in the fourth quarter in the face of a series of strikes against pension reform, which means France has entered a technical recession, defined as two consecutive quarters of contraction.
The government put France under one of the most strict lockdowns in Europe from mid-March, shutting down vast swaths of the economy until restrictions began to be lifted on May 11.
Although economic activity is gradually coming back on line, INSEE estimated earlier this week that the economy may contract 20% in the second quarter.
“While high-frequency and survey data suggest activity has picked up as the lockdown eased in May, the rebound looks gradual, and we only see a 2022 return to pre-Covid-19 output levels,” Morgan Stanley economist Jacob Nell said in a research note.
The lockdown depressed household spending, traditionally the motor of French growth, and the slump only accelerated going into the second quarter. INSEE said on Friday that consumer spending had plunged a record 20.2% in April from March, when it had already slumped 16.9%.
With consumers unable to spend money in most shops, cafes and other retail outlets during the lockdown, INSEE said households’ savings rate surged in the first quarter to 19.6%, a level not seen since the late 1970s.
Meanwhile, businesses corporate profit margins collapsed, tumbling to 29.4%, the lowest level since 2013.
(Reporting by Leigh Thomas; Editing by Hugh Lawson and Carmel Crimmins)