Reconfinement, less severe economic impact than in spring

First save lives, then protect the economy. During his fifth solemn address to the French, Wednesday evening October 28, President Macron reaffirmed the principle that has guided the government’s action since the outbreak of the health crisis. Principle which led him to decide on a national reconfinement for four weeks from Friday, October 30.

→ PRACTICAL. Reconfinement: what is allowed and what is prohibited

The measure will lead, as during the first general confinement decreed last spring, the closure of many places open to the public. If the decree of March 23 which fixes the list of them is renewed as it is – which remains to be confirmed -, the bars and restaurants, shopping centers and non-food stores, as well as places of leisure and culture (sports halls, cinema, theater, museums).

A re-containment that comes at the worst time

The same causes, same effects: these restrictions will mechanically impact the activity of sectors affected by a kind of double penalty. “During the first confinement, from mid-March to mid-May, the turnover of accommodation and catering or cultural activities had tangent to zero. Then, the deconfinement had allowed a certain recovery during the summer months, but less strong than in other sectors, and since slowed down by the effects of the curfew ”, recalls Julien Pouget, head of the conjuncture department at INSEE.

However, for many of the businesses concerned, the re-containment comes at the worst time. “The months of November and December count double and it is the third year in which the Christmas period is disrupted after the movement of yellow vests and strikes”, worries Jacques Creyssel, boss of the Federation of commerce and distribution.

A study by the SAD Marketing agency specifies the ten activities that will suffer the most: “Those who achieve more than 20% of their turnover at this time of the year, from games and toys to leather goods, including perfumes, books and clothing”, underlines Benjamin Aynes, partner of the firm.

Losers and winners

Given the weight of this non-food trade sector – 200,000 stores, 770,000 jobs and about 5% of the wealth produced each year – its shutdown will lead to a deterioration in the economic situation. “But the impact should be slightly less severe than in spring”, estimates Pierre Benadjaoud, France analyst at Crédit Agricole.

→ MAINTENANCE. “A re-containment necessary to protect the economy”

First, because industry and construction should be less affected than during the first containment, most companies having adapted to health protocols to continue their activity. Then because other sectors could do well, such as distribution which recorded a 7% increase in its turnover thanks to the crisis.

Finally, because the government has planned to renew, or even extend, accompanying measures – solidarity funds, partial unemployment, deferral of charges, loans guaranteed by the State – to help traders, the self-employed and small bosses to pass this difficult course.

The price to pay to save lives

Will these shock absorbers be sufficient? “Once again, the French economy is placed under anesthesia. This anesthesia is shallower than in the spring, so we can hope, on paper, that the shock will be lighter. But it is intervening in an already weakened economy ”, points out Julien Pouget.

Especially since there is still the unknown of consumer behavior: if the confinement is lifted in a month, will they return to the stores or will they continue to save as a precaution, while waiting for better days?

While it is still too early to make forecasts, economist Pierre Benadjaoud points out that an average drop in activity of 20% would cost around 1.7 points of growth. Or some 40 billion euros. The price to pay to save lives.


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