France: From controlling the virus to living with it
Head of Macroeconomic Research
Summary: In its latest monthly report on economic activity released earlier this week, the Bank of France confirmed that the economic rebound continued in July, but at a slower path than in June. Based the high-frequency data we track, such as mobility in retail and recreation and electricity consumption, it appears that the rebound is losing steam in August. At the very same time, the number of new coronavirus cases is increasing at a steady path, forcing the authorities to put in place stricter social distancing measures. France, like many other European countries, has to race against time in order to contain the virus spread before the seasonal flu starts. In case of failure, it would put massive pressure on the health service and might force authorities to resort to more drastic social distancing measures, i.e. localized lockdown, restrictions to transport etc. that would ultimately cause severe economic disruptions again.
According to the Bank of France, the economic rebound continued in July, but at a slower path than in June. On average, the weekly loss of economic activity was about minus 7% in July versus minus 9% in June compared with a normal week. For August, the central bank is very cautious, pointing out that preliminary statistics tend to suggest “a stabilization or a very slight improvement in activity”. This assumption is consistent with the high-frequency data we track, such as mobility in retail and recreation and electricity consumption. The below chart shows that mobility in retail and recreation is stabilizing in early August. However, weekly visitor number to retail and recreational stores is still 4% below the level of a normal week before the pandemic outbreak.
In the second chart, we have plotted electricity consumption level in 2020 and the evolution over the same period last year. As it is an intermediate consumption intensively used by companies, it allow us to assess in real time the state of the production process. Based on the latest statistics, electricity consumption remains 15% below the 2019 August level, confirming that the level of production, especially in the industrial sector, is not back to normal yet.
The observed stabilization in economic rebound is not only happening in France but also in almost all the countries that experience further virus spread. A higher number of Covid cases was expected following the lift of the lockdown but the latest official figures suggest that France is about to enter into risk-zone again. Since June 1, the number of fatalities is almost close to zero, but the number of confirmed cases has been surging fast, reaching its highest weekly level since the end of April. According to the Prime Minister, on average 25 new clusters are discovered per day nowadays compared to 5 clusters three weeks ago. Further social distancing measures have been implemented at local level in 90% of the biggest cities, such as mandatory mask-wearing in crowded streets, and the government is weighting the pros and cons of mandatory mask-wearing in working places from September as well.
France has to race against time in order to contain the virus spread before the start of the seasonal flu, which usually increases pressure on the health system. In case of failure, the risk is that the health system won’t have the capacity to simultaneously deal with Covid and flu, thus forcing authorities to resort to more drastic social distancing measures (i.e. localized lockdown, restrictions to transport etc.) that would ultimately cause severe economic disruptions again and probably translate into slow GDP rebound in Q3 and a relapse in Q4.
Quarterly Outlook Q1 2022
Quarterly Outlook Q1 2022: Fuelling the Energy Crisis
- The green transformation is fuelling the energy crisis. Is it time to base our energy future on reality not fantasy?
Energy crisis could turn energy stocks into secular winnerWith long-term expected returns for the global energy sector close to 10%, we look at 40 stocks that could be set to cash in.
Commodities supported by greenflation and tight supplyThe commodity sector recorded its best year since 2000 in 2021. Will the good times will keep rolling in 2022? Ole Hansen thinks so.
The bond bear market will not spare anyoneInvestors will need to prepare for the pain of a bond bear market in 2022. But are there opportunities out there, too?
Mean reversion for big 2021 moves and lots of volatilityDon't expect the Japanese yen or Chinese renminbi to stay at their overstretched valuations for long. Get the FX Outlook now.
The future in energy-intensive proof-of-work looks dimIn the midst of a global energy crisis, electricity-guzzling Bitcoin and Ethereum are set to feel the heat from politicians and investors.
Australian equities poised to benefit from the energy crisisThere may be an energy crisis, but that's fuelling a charge in the ASX. FInd out which stocks could be burning hot this quarter.
The EU’s unwise energy policyThe EU's energy crisis is one of the main drivers of inflation. Is there any relief around the corner, or is the situation critical?