The socio-economic impact of covid-19

With the presentation of the week’s highlights, alert updates, survey of the wider societal context, etc., our economists give a summary and analysis of the available data in order to provide an original sociological and economic monitoring of the Coronavirus health crisis. This survey is then rounded off with various theme-based focus studies published every week.

Socio-economic monitoring from July 17 to 24

This is the last in our series of weekly socio-economic monitoring surveys focusing on France and the world in general.

The deterioration of the health situation in the United States and in many European and Asian countries is worsening, with 350 million people confined worldwide, including 138 million in India. While it is true that the economic rebound exhibits cyclical characteristics, it is more “technical” in nature.

In France, it seems likely that a 2nd wave of the pandemic will hit – as widely expected by the population in general – but uncertainty remains regarding its size and duration. Globally, it is expected that the health crisis will end in 2021 rather than earlier. New business creations rebounded sharply in June to more than 75,000 entities, exceeding their pre-crisis level notably in the fast food and home delivery sectors. Retail sales are also enjoying a strong recovery overall but this general trend masks sharp differences between individual sectors. 

The crisis has modified the values and concerns of the French population (BVA). At present, the question of health is by far the subject of greatest concern to the French in their day-to-day lives, followed by their purchasing power, the environment, and pollution. In terms of the scale of values, the family is on the rise along with ecology, with work and freedom in relative decline. For the coming months, people’s concerns are more focused on the economic crisis, a new wave of the Covid epidemic but also social anger/social movements, proof that the health crisis has not relaxed pre-existing tensions. Private companies enjoy a positive image, their commitment being widely welcomed (continuity of activity, social solidarity initiatives, etc.).

Regarding the use of digital technology, is it a change in scale or saturation? The explosion of remote digital practices has broken down barriers and yet the desire to have “real contact” once again with family and friends, and with nature, to get out of doors, is very widespread. 
In terms of consumption, are we faced with freely chosen, or imposed, frugality? There is definitely a desire to consume in a “responsible” manner (organic food, products made in France, short distribution circuits, etc.) but this desire runs up against the affordability barrier related to economic difficulties that are both present (purchasing power, unemployment, etc.) and anticipated (precautionary savings).
On the labor front, organizations are in turmoil. With the removal of legal, organizational and psychological barriers, teleworking has been adopted on a massive scale. Nevertheless, this is accompanied by increased insecurity in certain jobs, in sectors that have been severely affected (tourism, aviation, etc.) or are facing serious difficulties (clothing, services, sport, etc.).
Mobility is being buffeted by a series of headwinds. Although a surge in soft mobility has been noted, the use of the private car has increased, considered to be a safer means of transport in times of epidemic.

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here:

Socio-economic monitoring from July 10 to 17 and a focus study on current events & real estate

While it would appear that a strong economic rebound is definitely on the cards, two major factors continue to have a chilling effect on future expectations: firstly, fears of a new wave of the coronavirus epidemic and, secondly, the risks of a prolonged slump in many industrial sectors, despite the economic support efforts already made. The intense mobilization of both the public and private sectors will have to continue to support the productive fabric.
The French continue to remain wary – indeed, pessimistic – about the health situation and are particularly worried about the economic and social outlook. In June, the proportion of households claiming to be able to “put money aside” again broke the previous records set in April and May. 

With regard to housing, the first available figures allow us to gauge the impact of the crisis. While the image enjoyed by real estate remains strong, it has not escaped the widespread wait-and-see attitude adopted by households in general. 
There has been a major decline in new real estate construction as well as in the sales of existing properties: the number of new builds launched between March and May 2020 was 28% lower than over the same period in 2019, with the month of May showing a 46% drop vs. May last year. It will be impossible to recover a large part of this lost business and a return to normal is unlikely before 2022.  On the other hand, against a background of what remain historically low interest rates, prices are holding up and should only experience a delayed and very partial adjustment in the wake of the collapse in volumes.

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here:  Socio-economic monitoring from July 10 to 17 and a focus study on current events & real estate

Socio-economic monitoring from July 3 to 10 – Focus on associations

A historic rebound in employment in the United States, a return to growth in manufacturing industry in China, an upward revision of government GDP forecasts for 2021 in France (growth of +8%)... these encouraging signs appear to confirm that the economy is emerging from recession. And yet the recovery is overshadowed by major worries about the continued spread of the Covid virus, which seems far from being under control especially in North & South America. It would appear that the morale of the French is more sensitive to these tensions and uncertainties about public health than it is to the good news on the economic front! 

The lockdown period has had a major impact on the activities of the 1.5 million associations in France: it is estimated that 68% have suffered a near total cessation of activity and 67% of the associations with employees have resorted to short-time working hours. The return to normal is proving to be very gradual, with operational difficulties encountered on the way to setting things in motion once again, with 3 out of 4 associations not expecting to resume a “normal” level of activity before September*.
Overall, however, associations have been affected to very different extents depending on their size and sector of activity: the medico-social or home help sectors have been particularly active on the front line combating the Covid crisis, while sports, cultural or leisure associations have discontinued their operations on a massive scale owing to the incompatibility of their activities with the constraints of the lockdown measures. These differences are reflected in the uncertainties over the future state of their financial situations: 49% have experienced a significant or total loss of income and 33% of the associations with employees fear that they will have to start laying off their personnel. In contrast, however, 8% are considering taking on new employees.

Donations from individuals seem to be holding up, with intentions to donate focusing primarily on health and medical research (39%), aid to the needy (27%), and environmental protection (27%).
All in all, while the associative sector seems to be demonstrating a certain degree of resilience, individual associations must anticipate a transformation in the way they operate, notably as far as digital technology is concerned whose role has gained in importance with regard to both employees and volunteers, members/beneficiaries or partners.

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here:  Socio-economic monitoring from July 3 to 10 and a focus study on associations

*#COVID-2 survey of the Associative Movement and the National Network of Maisons de Associations, conducted by Recherches & Solidarités online from May 14 to June 15, 2020 among 12,248 association officers.

Socio-economic monitoring from June 26 to July 3 – Focus on state-guaranteed loans in France and Europe

In the Eurozone in general, and to an even greater extent in France, the most recent economic indicators confirm the previous week’s already notable rebound in business activities, especially in services, the sector most severely affected by social distancing measures. However, as the WHO itself reminds us, the news is worrying on the health front with the emergence of new outbreaks of infection in several countries such as Germany and the United States. Although the French are particularly sensitive to this situation, our fellow citizens are getting used to the idea of “living with” the coronavirus for a certain length of time... 

Business organizations, for their part, have suffered a major shock. By having recourse to loans, they have been able to defer and soften this impact but at the cost of seeing their level of indebtedness rise by 10% in the space of five months, i.e. €165 billion. Even if the distribution of state-guaranteed loans (SGLs) is declining, aggregate borrowings are still far from including the €104 billion granted under this mechanism. Corporate debt should continue to rise in the coming months, but with contrasting effects per region and a more significant impact on VSEs and SMEs. 
The number of appeals filed by companies to debt mediation services was six times higher over a two-month period (April and May) than in 2019 as a whole. These financing difficulties proved to be particularly severe in the Hauts-de-France, Normandy and Brittany regions. The use of SGLs has been very high in Corsica and, to a lesser extent, in the Provence-Alpes-Côte d'Azur region where this facility represents 13.5% and 8.2% respectively of the value added of the business economy in these regions (vs. an average for metropolitan France of 6.6%).

Overall, France, along with Spain, stands out for the effectiveness of its SGL mechanism and the responsiveness of its banking system. In Spain, considerable use has been made of this financial support owing, in particular, to the major economic shock suffered by businesses and the simplicity of the loan-application procedures.  In Germany, companies have made less use of this facility, despite the generosity of the measures, thanks in particular to a more favorable ex-ante situation and the more limited impact of the crisis on the German economy. In the United Kingdom, use of this financial support has been moderate owing to the slow rollout of the scheme and a less generous state guarantee.  In Italy, where companies are facing a difficult economic situation, the complexity of the procedures and the fragility of the banking system mean that the scheme has not been used extensively despite a high guarantee. 

Although the measures to ensure the survival of the productive fabric have now been implemented in France, further work must still be done to reconfigure the business ecosystem that continues to suffer from excessively low margin rates and poor debt-to-equity ratios. If this reconfiguration is not completed, French SMEs risk prolonging – and accentuating – their implicit strategic choices of the last twenty years, consisting in prioritizing financial consolidation and sustainability over investment and future growth.

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here: Socio-economic monitoring from June 26 to July 3 – Focus on state-guaranteed loans in France and Europe

Socio-economic monitoring from June 19 to 26 – Focus on mobility

Although the economic indicators continue to blow alternately hot and cold, the turning point in economic recovery is clearly behind us. Admittedly, the decline in GDP (which fell -17% in Q2 2020) is unprecedented in France… but, for the first time, this measure of economic growth is less negative than the previously anticipated collapse of -20%. Business activities are picking up again but this recovery is being driven by a massive injection of support measures of all kinds.
While the economic rebound is slowly gaining momentum, the final victory over the virus is not yet won: the principal risk now lies in uncertainty about a second wave in the pandemic in China, India, the United States, and even in France, and goes hand-in-hand with a (temporary?) upsurge in pessimism among the French, the majority of whom expect new lockdown measures to be imposed in the future. 
Behavior in terms of mobility provides an excellent illustration of the trends, transformations, and tensions visible in the economy and society in general. The health crisis has disrupted French people’s mobility, the principal vector – and the way to contain – the Covid-19 epidemic. But after the lifting of lockdown measures, the return to normal is proving to be a lengthy process, incomplete and patchy in nature.
Without mentioning the heavily impacted air-travel industry, the avoidance of public transport is hastening the development of more energy-efficient ways of traveling (such as cycling or walking) but also, to take the example of China, the adoption of more energy-intensive means of transport with the greater use of individual cars, a symbol of autonomy and a way to protect oneself against infection. If the automotive sector is suffering a collapse in sales, with a 48% drop in passenger car registrations in the first five months of 2020 vs. 2019, a rebound was observed in early June, especially for hybrid vehicles.
The widely shared experience of teleworking (but also distance learning and telemedicine) has shaken up practices and organizations, and could foreshadow a more systematic adoption of teleworking, thereby reducing travel at a structural level and even eroding the dynamics of metropolitanization. Tensions could be further exacerbated between the “low-carbon” ideal pursued by urban dwellers and the reality of an unavoidable and persistently carbon-intensive mobility in peripheral and rural France.

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here Socio-economic monitoring from June 19 to 26 – Focus on mobility

Socio-economic monitoring from June 12 to 19 – Focus on savings

Last week's rally proved to be short-lived, and the release in rapid succession of increasingly pessimistic economic forecasts from central banks and international agencies, coupled with new health fears, has drained the markets of their earlier optimism. At the same time, the Banque de France confirmed that the decline in French GDP would exceed 10%, with a third support plan gradually taking shape in the form of ad hoc arrangements in favor of the most vulnerable sectors of the economy. The French, however, have not been particularly affected by this wave of disappointing news: their skepticism – indeed, their deep-rooted pessimism – about the country's economic future is holding steady and their worries about the pandemic are declining in a gradual, albeit limited fashion. Their consumption has recovered with a return to almost normal levels in early June, but marked by major disparities between sectors.

The current crisis seems rather to be reviving both the need for precautionary savings and the desire to prepare for an increasingly disquieting long-term outlook. Never has the proportion of people who “manage to put money aside” risen so far above that of non-savers in nearly 50 years. In March and April, the French had already converted into financial assets €21 billion more than in 2018-2019, ciefly in the form of readily available funds (sight deposits and passbook savings accounts). Their average savings rate – which was already high in the first quarter of the year – could well acquire “historical” status in 2020 at a rate in the region of 20%... as it did in the 1970s! This statistic, however, masks a fundamental disparity in the financial situations of French households: declining income (and consequently fewer savings) for some; constant levels of income but reduced spending (and therefore greater savings) for others.

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here:  Socio-economic monitoring from June 12 to 19 – Focus on savings

Socio-economic monitoring from June 5 to 12 – Focus on young people

Although the positive orientation of the stock market and higher oil prices point to a shift in economic indicators (confirmation of the rebound in China, massive job creation in the United States, more limited recovery in the Euro zone, etc.), the economic impact of the pandemic is constantly being revised upwards: for France, an 11% drop in GDP and a public debt/GDP ratio of more than 120% and, for the Euro zone as a whole, a decline in GDP of almost 9% and inflation below the 2% target figure until 2022.  The focus of people’s worries, however, is changing more rapidly. If 71% of the French population still worry about catching the coronavirus, only 25% believe that "the worst is still to come." It also seems that people are beginning to worry more about their economic prospects than about their health.  This is particularly true among 18-24 year olds, who risk being durably impacted by the pandemic, both by the intensity of the feeling of isolation and by the deterioration of their prospects for professional integration.

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here Socio-economic monitoring from June 5 to 12 – Focus on young people

Socio-economic monitoring from May 29 to June 5 – Focus on the international arena

In the first quarter of 2020, the decline in national GDP was more significant in countries enforcing strict lockdown measures. The relative performance (in terms of lost business activity/severity of measures) has so far proved better for South Korea, Germany and the United States and worse for France, Spain and China. What is more, Q1 GDP contraction in Germany was only half of that noted in France, Spain and Italy. 
Economic indicators are still showing little sign of the expected rebound and suggest that the recession will be bottoming out later than anticipated. Depending on the timetable for lifting the lockdown measures, things are slowly returning to normal… but at a faster pace in countries such as Germany and the United States. The rapid, large-scale implementation of support plans in Europe is leading to a very sharp increase in the level of public debt, liable to trigger a reappraisal of sovereign risk in the Euro Area (EA). While the exacerbation of public debt is widespread, it affects European countries in different ways, with a notable impact on countries that are already heavily indebted, such as France, with a more acute deterioration in their debt/GDP ratios.
French society, for its part, is facing pressures acting in potentially contradictory directions: health constraints vs. the quality of life and social relations; security provided by the lockdown vs. damage done to the economy... Individuals are beginning to “carry on regardless” and are adjusting their lifestyles to make the most of the new situation. 

But also the week’s highlights, alert updates, and a survey of the wider societal context to be discovered here: Socio-economic monitoring from May 29 to June 5 – Focus on the international arena  

Socio-economic monitoring from May 22 to 29 – Focus on VSE/SMEs

Are we witnessing a continued decline in business activities or a rebound in our economy? Both undoubtedly... which is a sign of improvement in itself, as is the Franco-German agreement which reduces pressure on Italian rates… but the increase in tensions between the USA and China and the resistance of Northern European countries to the Franco-German agreement give us a foretaste, at this moment in time, of a “post-pandemic world” characterized by confrontation more than cooperation. The French, for their part, seem to be faced with a new dilemma: favor quality of life or comply with health imperatives. Some trade-offs are consensual, others less so... 
For SMEs and VSEs, the provision of state-guaranteed loans, partial unemployment benefits, and the deferral of payroll taxes have clearly reduced the pressure on cash flow, even if 7% of SMEs already claim to be facing severe difficulties. But the immediate future is worrying. If it is hoped that business activities will return to their previous levels towards the end of 2020, cash flow positions are expected above all to deteriorate within the next 3 months or so under the pressure of increased working capital requirements and a reduction in state-sponsored assistance at a time when sales have not yet picked up sufficiently. We should bear in mind, however, that SMEs are structurally less vulnerable than in 2009; they should be able to ride out these economic difficulties and embrace the digital transformation (as long as they don’t underestimate the challenges of this transformation) in better shape than feared.

But also the week’s highlights, alert updates, and a survey of the wider societal context here. Socio-economic monitoring from May 22 to 29 – Focus on VSE/SMEs

Socio-economic monitoring from May 15 to 22 – Focus on the sports economy

While it is now easier to appreciate how much the economy has been impacted by the crisis, a clearer idea of the shape of the post-lockdown economic environment is also emerging with, in particular, the trade-offs between real and partial unemployment, the lasting fragility of private entities, and the explosion of public debt.
 
The sports economy has been hit hard by the lockdown measures triggered by the Covid-19 pandemic.  While 64% of French people miss the ability to indulge in outdoor sports, 40% have practiced a sporting activity during the lockdown. Sports associations are potentially more vulnerable than the average of other associations as their resources are derived less from subsidies than from membership fees, a source of funding threatened by the interruption of their activities. The impact is likely to be even more noticeable on companies in the sports sector where lost turnover could reach 30% compared with anticipated growth of 4% to 5% in 2020. In contrast, however, digital sports platforms and e-sporting activities have attracted large numbers of users during the stay-at-home period and could become part of French people's everyday lives. In the medium to long term, the sports economy should benefit from the prevalence of public health issues and the rise of individuals’ concern for the preservation of their health capital.

Discover the details of these analyses along with the week’s highlights, alert updates, and a survey of the wider societal context here:  Socio-economic monitoring from May 15 to 22 – Focus on the sports economy

You can also discover or rediscover the complete version of Groupe BPCE’s study on the sports economy published at the end of February and already a reference in this area, by clicking here

Socio-economic monitoring from May 8 to 15 – Focus on local & regional France

It was a short week but, once again, a week rich in economic indicators and the findings of surveys on the state of mind of the French.  At a local and regional level, it should be noted that the impact on people’s health and the impact of the loss of economic activity do not overlap on the map. The epidemic is now concentrated in the North-East of France and in the Ile-de-France (Greater Paris) region owing to a number of social factors – density of the population, economic inequalities generated, notably, through a lesser use of teleworking – and geographical proximity to the first clusters of infection. The economic impact of the crisis and the use of State-guaranteed loans (and the credit mediation scheme) are scattered highly unevenly across France, notably due to the specific sectoral characteristics of economic activities. 
The measures taken to contain the epidemic are also changing the way the French perceive and interact with their environment: could this explain the new (and lasting?) partiality of French households for the previously neglected real estate market of houses located away from major urban areas? 

But also the week’s highlights, alert updates, and survey of the wider societal context… to be discovered ici.  Socio-economic monitoring from May 8 to 15 - Focus on local & regional France

Socio-economic monitoring of the period from May 1 to 8 – Focus on savings and consumption

The steep decline in consumption triggered by the lockdown measures in France is estimated at -33% by the INSEE national statistics institute. This drop can be explained by a number of factors, the combination of which will determine the conditions for economic recovery: difficulties in accessing supply (closure of most shops under lockdown), financial difficulties (decline in income due to unemployment, cessation of activity by the self-employed, etc.), and a reduction in the propensity to consume.

At the same time, household savings have risen significantly. Although most of this increase is driven by ‘forced’ savings owing to repressed consumption, it also reflects mounting public uncertainty about the future. In 2020, French savings rates are expected to settle in the 17%-20% range, well above the long-term average. These additional savings will chiefly boost current account balances and, secondarily, holdings in passbook savings accounts but they will also favor equities. According to the AMF stock market regulator, in the space of 5 weeks, a total of 580,000 people – including 150,000 new investors – sought to take advantage of the drop in equity prices by buying shares in companies listed on the SBF 120 stock market index.

But also the week’s highlights, alert updates, and survey of the wider societal context… to be discovered here.  Socio-economic monitoring of the period from May 1 to 8 + focus on savings and consumption

Socio-economic monitoring of the period from April 24 to May 1 – Focus on companies

The lockdown has slashed economic activity in France by almost one half (49%) compared to ‘normal’ (INSEE, April 23). While all sectors are experiencing a downturn in activity, the extent of the decline varies considerably:
-    Sectors almost at a standstill: automotive, metallurgy, machine and equipment manufacturing, passenger transport, hospitality (accommodation/restaurants), temporary work, and construction.
-    Sectors badly affected: textiles, freight transport, information and communication, retail trade.
-    Relatively less impacted: pharmaceuticals, chemicals, agriculture, and food.

SMEs and micro-companies: according to the survey carried out by the Confederation of small and medium-sized enterprises (CPME) from April 2 to 12, 60% of micro-companies/SMEs reported a collapse in their activities exceeding 50% in March, and more than half of the managers feared their companies would go bankrupt. 
Eighty percent of managers consider themselves well-informed about the French government’s emergency plan and felt their banks were supporting them well; 83% of micro-companies/SMEs have filed requests for short-time working and 28% have already applied for the State-guaranteed loan (21% plan to do so in the near future).

Intermediate-sized enterprises (ISEs): according to the survey conducted by the Movement for Intermediate-Sized Enterprises (METI) on April 17 and 18, the decline in their business activities in April is estimated at -53%. A total of 64% of the ISEs included in the survey have applied for the State-guaranteed loan; 87% have had recourse to short-time working measures and 74% of ISEs anticipate difficulties after the ending of the lockdown period in France on May 11 (chiefly related to sanitary requirements).

But also the week’s highlights, alert updates, and survey of the wider societal context… to be discovered here. Socio-economic monitoring of the period from April 24-May 1 + focus on SMEs

Socio-economic monitoring of the period from April 17 to 24 – Focus on agriculture/food

The lockdown has led to a notable shift in food consumption patterns, a ‘quasi-wartime economy’: a sharp increase in household food consumption, refocusing on basic and/or long-life produce; conversely, festive consumption or consumption ‘for pleasure’ has declined.
Agriculture is one of the few sectors where production activities are continuing with a decline estimated at ‘only’ -10% by INSEE: little short-time working but unmet labor needs and public calls for volunteers. The disruption of supply and distribution chains, however, is undermining the industry’s stability.
Some players will emerge from the crisis stronger than before: networking platforms, farmers’ shops, supermarkets, and cooperatives. The crisis is reinforcing the short-circuit business model, or even on-farm processing and more sustainable consumption patterns with a preference for local produce. Finally, the determination expressed by the French President to “restore French agricultural independence” is a goal shared by 93% of French citizens (Odoxa-Comfluence/Les Echos).

But also the week’s highlights, alert updates, and survey of the wider societal context… to be discovered here. Socio-economic monitoring of the period from April 17-24 + focus on agriculture

Socio-economic monitoring of the period from April 10 to 17 – Focus on residential real estate

With the majority of construction sites having shut down haphazardly since the announcement of the lockdown measures, INSEE estimates that the construction industry has lost 88% of its activity. The fact that construction work will only start up very gradually should depress new building activities overall in 2020. All categories of real-estate and construction professionals are affected, including many self-employed professionals. 
According to a survey carried out by BVA for Drimki at the end of March, 15% of participants in the study said they had a real-estate project over the next twelve months, 2% fewer than in February: a notable decline but not a major collapse.
While the estimated impact of the crisis is immediate and massive in terms of volume (transactions and construction), prices should adjust with a certain time lag and with less pronounced fluctuations: in the existing properties segment, transactions are expected to decline by between 25% and 35% in 2020, with prices falling only slightly in the short term (about 2%) but then more markedly in 2021 (between -4% and -7%); in the new-build segment, sales are expected to fall by 40% with a limited recovery in 2021 but with prices holding up unless developers are forced to sell off their stock in a hurry.

But also the week’s highlights, alert updates, and survey of the wider societal context… to be discovered here. Socio-economic monitoring of the period from April 10-17

Socio-economic monitoring for the period from March 28 to April 3 – Focus on companies

Business insolvency is expected to increase in 2020 (+8% according to Euler Hermès) while this was already a reason for concern for SMEs with more than 50 employees before the appearance of the Covid virus. According to INSEE, the effects of the pandemic will impact certain sectors more severely than others: market-related services (non-food retailing, restaurants, transport, etc.), the non-food industry (especially the automotive, aeronautics, capital goods segments, etc.) and construction.
The resilience of most of these sectors has been weakened over the past two years by the economic slowdown in France and by specific, one-off events (the ‘Yellow Vest’ crisis and strike action).
To meet their financing needs, companies have several options; they could draw on the cash deposits they have built up over the past several years (around €450bn in sight deposits at the end of 2019) above and beyond the cash facilities already negotiated (which they are expected to draw down as far as possible) and state-guaranteed loans.

But also the week’s highlights, alert updates, and survey of the wider societal context… to be discovered here. Socio-economic monitoring from March 28 to April 3