13 Jul 2022
The French economy grew around 0.25% in the second quarter, despite soaring inflation, the impact of the war in Ukraine and mounting uncertainty regarding the outlook for business.
Based on a monthly poll of 8,500 businesses, the central bank’s review showed industrial activity remained stable whilst services increased marginally last month. In July, firms forecast a slight fall in industry and moderate services growth.
“In an environment marked by the war in Ukraine and the strong tensions on commodities markets, activity continues to resist even if business leaders point to a lacklustre outlook,” the central bank said on Tuesday.
The short-term assessment of France’s outlook is in stark contrast with more gloomy forecasts for the remainder of the year, Bloomberg reports. Both the government and Bank of France have slashed their economic growth predictions, signalling little further growth in 2022.
In addition to France, investor confidence in Germany has fallen to an 11-year low as the threat of recession increases and risks rise that the country is shut off from Russian natural gas deliveries.
In regard to the energy crisis that has resulted in soaring power and fuel prices, according to the head of the International Energy Agency, “the world has never witnessed” such a major crisis.
French Finance Minister Bruno Le Maire has cautioned that it’s likely the country will be cut off from Russian gas.
However, the survey carried out by the Bank of France revealed a sign that inflationary pressures may ease as the number of businesses planning price hikes fell for the second consecutive month.
“For consumer prices to start declining in the next year, it’s comforting to see pressures are starting to slow,” said Bank of France Chief Economist Olivier Garnier. “I wouldn’t call it a decrease in prices, but an end of the acceleration.”