French economy holds pace as central bank sees 0.2% growth

The French economy is forecast to grow 0.2% this quarter, keeping its second-quarter pace as the central bank cites services strength.

0.2% growth matches spring

The Bank of France said Tuesday that gross domestic product is likely to rise 0.2% in the three months through September. That would match the prior quarter and sit above a 0.1% economist estimate cited alongside the bank’s survey.

The projection came from the central bank’s latest monthly poll of 8,500 business leaders, giving policymakers a near-term read on demand, costs and order books. The survey matters more than usual as France enters the autumn with modest output growth, weaker labor data and a strained public budget.

Services carry August activity

The bank said services remain the main support for activity, with transportation, information and communication among the areas still expanding. Manufacturing also improved in August, reversing some of the softness seen earlier in the summer.

The sector split is uneven. The central bank expects energy activity to expand, while construction is set to decline further as public contracts become scarcer.

Pricing data offered a second source of support for the growth view. Business leaders reported that increases in raw-material costs and selling prices eased in July, a change the bank linked to a smaller pass-through from earlier input-cost pressure.

The Bank of France said the easing in actual and expected August price increases could show that a significant portion of spring input-cost gains has already been passed into final prices. If that reading holds, companies would face less pressure to raise selling prices again into the end of the quarter.

Heat waves and Middle East risk

The bank also warned that the forecast sits under significant uncertainty, citing the geopolitical situation in the Middle East and the risk of further heat waves before summer ends. Those risks are specific rather than abstract: energy prices, transport flows and weather-sensitive activity can all shift quickly when supply conditions change.

The wider French picture remains mixed. Output rebounded in the second quarter, but Insee data cited in the source material show unemployment at its highest level in almost six years, while the government continues to face pressure from a large budget deficit.

For the euro area, France’s 0.2% growth path would signal steadiness rather than acceleration in its second-largest economy. That matters for global macro investors watching whether Europe can avoid a weaker handoff into autumn while inflation pressures cool unevenly across sectors.

If services keep expanding and energy output improves as the Bank of France expects, France would extend a low-growth path supported by domestic activity. In that scenario, the euro area would get a steadier contribution from France, the central bank’s projection would gain support and transport, communications and energy firms would enter the autumn with a firmer demand base.

If Middle East tensions feed through to energy costs, or if new heat waves disrupt activity, the same 0.2% forecast becomes harder to sustain. That path would put pressure on French output, complicate the pricing relief reported by companies and hit construction, transport and energy users through costs, delays or weaker public-sector demand.