Paris (awp/afp) – The war in the Middle East is expected to 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 strengthened “significantly” and exceeded the expectations expressed by business leaders in the previous survey.
Services and construction remain “overall well oriented,” despite contrasts from one sector to another.
However, the survey conducted from March 27 to April 3 with 8,500 business leaders suggests that activity likely slowed this month.
While 11% of industrial business leaders raised their selling prices in March, a proportion in line with historical averages, decreases did not exceed 2%, a lower proportion than the 5% usually observed in March.
Furthermore, 23% of these industrial business leaders are considering a “moderate” price increase in April in response to the rise in the cost of materials for production.
In construction, an acceleration of prices is expected in April. In merchant services, a 10% increase is expected this month, close to the average seen in the past, notes the Bank of France.
Overall, these business leaders report a significant increase in uncertainty, reaching a level comparable to that seen at the beginning of the conflict in Ukraine four years ago.
The uncertainty indicator established by the Bank of France is based on textual analysis of the comments from the surveyed companies.
The executives have expressed “strong concerns,” both about price changes and rising freight costs, risks of supply difficulties, and potential logistical disruptions.
They are facing “increased difficulties in short-term planning,” leading to “particularly cautious forecasts” in this context, the survey notes.
Bank of France Governor François Villeroy de Galhau praised the survey for confirming the “resilience of the French economy, particularly in the industry sector” for March.
The forecast of quarterly growth of up to 0.3% “confirms our prediction of slowed but still positive growth in 2026, despite uncertainties related to the conflict in the Middle East,” he added.
INSEE will provide the first-quarter growth figures on April 30.
The governor points out that “this conflict has more negative consequences on the economy,” with “two signals of concern” to monitor, first the increasing uncertainty, and second the supply difficulties, especially for companies dependent on oil or fuel.
The announced price increases in April are “clearly a point to monitor closely,” he said, emphasizing the need for vigilance.
The government will convene a public finance alert committee on April 21, during which updated growth and inflation forecasts will be presented to account for the economic consequences of the war initiated on February 28 against Iran by the United States and Israel.
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