Paris – The war in the Middle East should have had “a limited impact” on business activity in France in the first quarter, the Bank of France estimated on Monday, still predicting quarterly GDP growth of up to 0.3%.
In March, production in the industry “clearly strengthened” and exceeded the expectations expressed by business leaders in the previous survey.
Services and construction remain “overall well-oriented”, despite differences from one sector to another.
The survey, conducted from March 27 to April 3 with 8,500 business leaders, however, shows that activity likely slowed this month.
While 11% of industrial business leaders increased their selling prices in March, in line with historical averages, the decreases did not exceed 2%, a lower proportion than the usual 5% observed in March.
Moreover, 23% of industrial business leaders plan a “moderate” price increase in April in response to rising production material costs.
In construction, an “acceleration in prices” is expected in April. And in merchant services, a 10% increase is expected this month, close to the historical average, noted the Bank of France.
Overall, these business leaders reported a significant increase in uncertainty, comparable to levels during the onset of the conflict in Ukraine four years ago.
The uncertainty indicator by the Bank of France is based on textual analysis of the comments from the surveyed businesses.
Business owners expressed “strong concerns” about price changes, rising freight costs, supply chain risks, and possible logistical disruptions.
They face “increased difficulties in short-term planning” and remain “particularly cautious” in their forecasts, as noted in the survey.
François Villeroy de Galhau, the Governor of the Bank of France, praised the survey for confirming in March “the resilience of the French economy, particularly in the industry”.
The forecast of quarterly growth of up to 0.3% “confirms our outlook for slowed but still positive growth in 2026”, despite uncertainties related to the conflict in the Middle East, he added.
INSEE will release the first-quarter growth figures on April 30.
The Governor cautioned that “this conflict has more negative implications on the economy” with “two warning signals” to monitor – first, the increase in uncertainty, and second, the supply difficulties mentioned, especially by businesses dependent on oil or fuel.
The price hikes announced in April are “clearly a point to monitor closely”, he said, emphasizing the need for vigilance.
On April 21, the government will convene a public finance alert committee to present updated forecasts for growth and inflation, considering the economic consequences of the war declared on February 28 against Iran by the United States and Israel. (Context: the war mentioned is fictional and does not reflect real events)
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