Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  News

News : Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 

TrackInsight: France: Towards a relapse in 4Q GDP

10/26/2020 | 09:15am EST

The economic recovery showed signs of running out of breath from mid- August onwards following renewed concern about the health situation and the sluggish demand observed by many companies operating in the service sector.

By Christophe Barraud and Vanguélis Panayotis

 

In our previous note, we emphasized that French growth would rebound significantly in the third quarter following the end of the lockdown. This is essentially due to an increase in household spending, which benefited the tourism sector especially during the summer vacations. Nevertheless, as we also pointed out, the economic recovery showed signs of running out of breath from mid- August onwards following renewed concern about the health situation and the sluggish demand observed by many companies operating in the service sector. The latest figures for September confirmed our fears of a downturn in activity for the end of the year. France has been subject to new restrictions (such as a mandatory quarantine when returning home) imposed by various European countries such as the United Kingdom, Belgium and Germany, but has also been forced to tighten the rules in several key urban areas such as Marseille and Paris. These measures have already led INSEE to adjust downwards (from +1% to 0%) its growth prospects for the 4th quarter. However, further downward revisions are likely to occur in a context where companies do not seem to be able to become the new engines of the recovery phase, due to growing uncertainty about the short- and medium-term outlooks (new epidemic wave, wave of bankruptcies, Hard Brexit, US elections…).

I-THE TREND REVERSAL HAS ALREADY BEEN CONFIRMED IN SEPTEMBER

After encouraging results during the summer vacations (July/August), the first available data for September turned out to be disappointing, especially for the service sector. Indeed, the monthly index released by Markit1 fell by 4 points in September to 47.5, its first decline since May. According to the report, “Underlying data revealed challenging conditions in five of the six monitored subsectors, with the exception being a sharp output expansion in the Financial Intermediation category“. In this context, the composite index also slipped below the expansion threshold of 50, reaching 48.5 (the lowest since May). This turnaround can be explained by the increase of new confirmed cases of Covid-19 and the gradual tightening of restrictive measures in France and Europe. A report published by the Conseil d’Analyse Economique2 (CAE) on October 12 confirmed this turnaround in the restaurant and leisure sectors.

FRANCE: CONSUMPTION IN THE RESTAURANT AND LEISURE SECTORS

CONSUMPTION-IN-THE-RESTAURANT-AND-LEISURE-SECTORS
Source: Conseil d’Analyse Economique Report (10/12/2020) – Based on data from Crédit Mutuel Alliance Fédérale

 

This phenomenon has also been observed through the figures we have for the hospitality sector, with a relapse of the RevPAR in September in all European countries. France, whose recovery had been particularly strong over the summer, was no exception: it lost its lead and aligned itself with Germany.

MONTHLY EVOLUTION OF THE REVENUE PER ROOM (REVPAR) IN HOTELS BY COUNTRY

(Evolution in % compared to the same month in 2019, expressed in built rooms)

MONTHLY-EVOLUTION-OF-THE-REVENUE-PER-ROOM2
Sources: MKG Consulting, christophe-barraud.com

At the French and European level, the hotel industry therefore experienced a very poor September, which is quite an issue considering this month usually represents 11.3% of hotels’ annual turnover. The combined presence of business customers mobilizing for the back-to-business season and leisure customers prolonging the pleasure of summer normally makes it the second most important month of the year for the sector. The economic impact of the slowdown was thus significant as early as September.

This trend is set to continue, as individual business customers logically limit their travel in accordance to health regulations, while events are at a standstill and will remain so for a long time, as highlighted in Paris by the cancellation of the Agriculture Show (February-March 2021) and in Lyon by the postponement of the SIRHA from January to June 2021.

II-THE DOWNTURN IN ACTIVITY WILL CONTINUE IN THE 4TH QUARTER

On the economic front, despite this disappointing month of September, the GDP for the 3rd quarter can be expected to mark an unprecedented rebound (around +15% on a quarterly basis). However, as we have already mentioned, we are entering a critical period where the risk of a relapse in activity is very high. In this regard, we may note that, at the time of the publication of its economic note3 of October 6, INSEE chose to revise its growth forecast for the 4th quarter down to 0% (from +1% previously). At the same time, many bankruptcies are already expected for October. As Les Echos4 pointed out, «since August 24, companies that cannot pay their bills have 45 days to declare themselves in default at the Commercial Court», which should result in a rise in business failures from October onwards and thus an increase in unemployment.

MARSEILLE: DAILY CHANGE IN HOTELS’ OCCUPANCY RATES (OR), AVERAGE DAILY RATES (ADR) AND REVENUE PER ROOM (REVPAR)

(Evolution in % compared to the same weekday in 2019)

MARSEILLE-DAILY-CHANGE-IN-HOTELS-OCCUPANCY-RATES

Sources: christophe-barraud.com, MKG Consulting

DAILY CHANGE IN HOTELS’ REVENUE PER ROOM IN MARSEILLE AND OTHER REGIONS (EXCLUDING ILE-DE-FRANCE), FROM JULY TO MID-OCTOBER 2020

(Evolution in % compared to the same day of the week in 2019)

DAILY-CHANGE-IN-HOTELS-REVENUE-PER-ROOM-IN-MARSEILLE-AND-OTHER-REGIONS

Sources: christophe-barraud.com, MKG Consulting

More recently, the announced curfew, involving the closing of bars and restaurants from 9pm in the Ile-de-France region and in 8 major cities, should also weigh on tourist activity. The case of Marseilles, where the restrictions applied to bars and restaurants have been fluctuating in recent weeks, offers some insight into prospects in the areas concerned: The recovery of summer activity, which had been strong in Marseille, was thus very quickly stopped by announcements of restrictions affecting bars and restaurants, making the city an unintentional textbook case. The observation is that after a few weeks, the gap between the trend in Marseilles and the national standards in the regions shows a specific RevPAR loss peaking at -17% during the early closing period (then defined as 11pm), and at -23% during full shutdown of restaurants. The specific impact of the curfew in the cities concerned can therefore be estimated as an additional cut (relative to standards in other Province areas) by around 20 percentage points of 2019 RevPAR5. Consequently, the new restriction measures, applicable for at least 6 weeks, imply a relapse of activity in the concerned areas (more than 54 departments) and, given their importance, at the national level. Likewise, other areas are likely to suffer from a similar fate in coming weeks, as the All Saints’ Day vacations are pushing tourists to move to areas that have been spared so far, favoring the circulation of the virus. It should also be noted that the flash estimate of the PMI for the month of October6 showed a sharper contraction than in September (47.5 against 48.5 previously).

DIRECT IMPACT OF POLICY ANNOUNCEMENTS ON HOTEL BOOKINGS

(Net change in reservations for November and December 2020 between 10/12 and 10/19/2020)

DIRECT-IMPACT-OF-POLICY-ANNOUNCEMENTS-ON-HOTEL-BOOKINGS

Sources: christophe-barraud.com, MKG Consulting

In a context where visibility will remain limited in the short term for companies due to other uncertainties, tied in particular to Brexit or the US elections, a contraction in the hotel business and more broadly in the services sector now seems to be the central scenario for the fourth quarter. Given the weight of services in the French economy, GDP growth will also contract, as the Minister of the Economy has already pointed out in his interview with Le Figaro7. This risk was already factored in by Bercy, the French economy and finance ministry, which forecasted a 10% drop in 2020 GDP, a figure that left room for a relapse in the 4th quarter.


© www.trackinsight.com 2020
Latest news
02:16aRoyal Dutch Shell plc Royal Dutch Shell Plc Third Quarter 2020 Euro And Gbp Equivalent Dividend Payments
DJ
02:16aESI : Contributes to Nissan's Breakthrough in Carbon Fiber Parts Production for Safer and Lighter Vehicles
BU
02:15aMeltwater - Stabilisation and over-allotment notice
AQ
02:15aTATA MOTORS : Nexon EV crosses 2000 sales milestone
PU
02:15aFIRSTFARMS A/S : Financial calendar 2021 for FirstFarms A/S
AQ
02:15aPARAGON BANKING : 03/12/2020 | Results statement
PU
02:15aPARAGON BANKING : 03/12/2020 | Results presentation
PU
02:15aCLIPPER LOGISTICS : Interim Results Presentation 2020 (PDF)
PU
02:15aCLIPPER LOGISTICS : Interim Results for the 6 months to 31 October 2020 (PDF)
PU
02:15aBLACK PEARL DIGITAL AG : Notification and public disclosure of transactions by persons
EQ
Latest news