French GDP fell less than forecast in Q1

According to the report from INSEE, in Q1 2020, real gross domestic product (GDP) fell sharply: -5.3% after -0.1% in Q4 2019, thus a revision of +0.5% compared with the first estimate published in April. Economists had expected a 5.8% decrease.

Household consumption expenditure recorded an unprecedented drop (-5.6% after +0.3%). Total gross fixed capital formation (GFCF) fell even more sharply (-10.5% after +0.1%). All in all, total domestic demand (excluding changes in inventories) contracted: it contributed -6.0 points to GDP growth.

Imports fell (-5.7% after -0.7%), but less sharply than exports which fell by 6.1% (after -0.4% in Q4 2019). Overall, the contribution of foreign trade balance to GDP growth was zero, after +0.1 points in the previous quarter. Conversely, changes in inventories contributed positively to GDP growth (+0.6 points after -0.5 points).

Household gross disposable income (GDI) decreased slightly (-0.1% after +0.9%): the decrease in value added produced by sole proprietors was partly offset by subsidies from the solidarity fund, so that their mixed income fell by 1.0%. With the recourse to the partial activity scheme, the wage bill received by households fell sharply (-1.8% after +0.7%), which was offset by a strong acceleration in social benefits in cash (+2.8% after +0.4%). Taxes on income and wealth fell (-1.5% after -2.9%): despite the technical rebound following the reduction in housing tax at the end of 2019, the reform of the income tax scale and the adjustment of taxes to the fall in income received supported disposable income. In addition, social contributions paid by households fell (-1.4% after +0.9%) with the decline in the wage bill.

Household consumption prices continued to increase (+0.3% after +0.2%). Overall, the decline in purchasing power of household GDI remained limited (-0.4% after +0.7%) given the scale of the fall in activity. Measured by consumption unit to bring it to an individual level, it fell by -0.5% (after +0.5%). At the same time, household consumption fell (-5.6% after +0.3%), resulting in a sharp rise of the saving rate to 19.6% after 15.1% in Q4 2019.