French economy is on the verge of the largest contraction since World War II

The French economy is likely to report its largest contraction since World War II in the first quarter of the year, with the outlook for the rest of the year deteriorating significantly amid massive blockades to curb the spread of coronavirus, according to data from the French Central Bank.

The regulator’s estimate of a 6% decline is another clear signal of the economic pressure from the shock of European economies from the simultaneous collapse in supply and demand. The quarterly decline in the gross domestic product (GDP) can only be compared to the 5.3% contraction recorded around the May 1968 mass strikes.

Like the country’s statistics agency, Insee, the central bank had to change its measurement method to try to assess the situation. It uses high-frequency data – including card transactions and claims for unemployment benefits – to confirm the results of its monthly survey covering 8,500 businesses.

In the industry, the sharpest decline in activity is seen in the automotive and mechanical engineering sectors, while the hotel and restaurant sectors are most affected by the service sector. Overall, the central bank said the loss of activity within a week of a national blockade was about 32%. At the same time, Insee estimates losses at 35%.

A study by the French Central Bank also found that factories operate only 56% of their capacity, down from 78% in February, a record low.

This loss of activity means that every two weeks, France’s GDP insulation will decline by 1.5% in 2020, the regulator said.

The bank warned that the actual loss of production may be different as businesses and consumers adapt to longer-term blockages.