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French economic activity at 65% of normal, business morale in record drop

FILE PHOTO: A view shows the deserted business district of La Defense as lockdown is imposed to slow the spreading of the coronavirus disease (COVID-19) in Paris, France, March 18, 2020. REUTERS/Benoit Tessier

PARIS (Reuters) - French economic activity and household spending are running at about 65% of normal levels due the coronavirus outbreak, the INSEE official statistics agency said on Thursday.

INSEE gave the first picture of the impact of the nationwide lockdown as it published its monthly business confidence index, which saw its biggest single drop since records began in 1980.

The index fell to 95 points from 105 points in February with even steeper declines seen in the services and retail sectors, INSEE said.

The French government has prepared a 45 billion euro ($49.1 billion) package - 2% of GDP - of crisis measures made up mainly of deferred taxes and payroll charges for companies, and payments to companies who put workers of reduced schedules.

Additionally, the government is guaranteeing up to 300 billion euros - 15% of GDP - of corporate borrowing from commercial banks to keep credit flowing to the economy.

INSEE said it was too early to try to forecast how deep the downturn would be, but it estimated that each month of confinement would reduce economic activity by 12 percentage points on a quarterly basis and a 3 percentage points on an annual basis.

With vast swathes of the economy in lockdown, the government estimated last week in an emergency update to the budget law that the economy would contract 1% this year, instead of the 1.3% growth it had previously forecast.

However, Finance Minister Bruno Le Maire has since warned that the downturn was likely to be much worse, comparing it to the Great Depression of 1929.

Reporting by Leigh Thomas; Editing by Shri Navaratnam and Jon Boyle