French Consumers Avert Deep Economic Slump: GDP Update

The French economy shrank much less than expected at the end of last year, though it remains mired in business restrictions and an uncertain roll-out of vaccines to combat the Covid-19 pandemic.

Gross domestic product in the euro zone’s second-largest economy fell 1.3% in the final three months of 2020, compared with a forecast for a contraction of 4%. Consumer spending rebounded 23% in December after plunging during lockdowns the previous month.

The report kicks off a series of economic updates across the 19-nation bloc. Germany probably avoided a contraction of similar proportions, though it’s also struggling at the start of 2021 as the spread of more infectious virus strains leads to longer curbs on activity. European Central Bank President Christine Lagarde has already promised to bolster monetary support if needed.

Key Developments

  • Coronavirus vaccine delays risk another existential crisis for the European Union
  • EU paves way to bigger pandemic bailouts for companies
  • High-frequency indicators show actity remains subdued in January

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French GDP (7:30 a.m. Paris)

With restrictions in place during much of the fourth quarter, consumption was down 5.4%. Business investment though continued to grow, rising 1.5% after a 21% surge in the previous three months. Exports rose 4.8%. The smaller than expected contraction at the end of 2020 means GDP for the whole year fell 8.3%.

Authorities are considering tightening restrictions beyond the current 6 p.m. – 6 a.m. curfew but has held off a decision this week, with Finance Minister Bruno Le Maire saying another lockdown should be a last resort. Such a move would stop the economy meeting the official forecast of a 6% growth in 2021, he said.

Coming Up (all times CET):

  • French producer prices (8:45 a.m.)
  • Spanish GDP, retail sales, inflation (9 a.m.)
  • Austrian GDP (9 a.m.)
  • German unemployment (9:55 a.m.)
  • German GDP (10 a.m.)
  • Euro-area M3, credit growth (10 a.m.)
  • Italian producer prices, wages (10 a.m.)
  • Belgian GDP (11 a.m.)

— With assistance by Barbara Sladkowska, Harumi Ichikura, Kristian Siedenburg, and Zoe Schneeweiss

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