PARIS (Reuters) – French economic growth is set to stall in the last three months of the year but not retreat as some business leaders fear, the central bank estimated on Tuesday in its monthly outlook.
Growth in the euro zone’s second-biggest economy was widely expected to cool after reaching 0.4% in the third quarter, buoyed by an influx of tourists for the Olympic Games in Paris over the summer.
The central bank estimated that the post-Olympic pullback would reduce fourth quarter growth by 0.2 percentage points, implying that the French economy would otherwise grow 0.2% from the previous quarter.
However, the outlook is increasingly murky following the collapse of Prime Minister Michel Barnier’s government last week over a budget dispute with opposition lawmakers.
The head of the Medef French employers’ federation Patrick Martin went so far as to say over the weekend that the economy was probably already in recession.
The central bank’s monthly survey of business sentiment suggested activity was still expanding moderately in the dominant service sector but was pulling back in the industrial sector and in a more marked retreat in construction.
Industrial companies reported order books had fallen to levels not seen since the depths of the COVID crisis while manufacturers were operating at 74.7% of capacity, down from 75.2% the previous month.
Executives polled indicated growing uncertainty about the outlook, especially in industry and construction, where it was the highest in two years.
That tallies with recent polls of business sentiment which have shown firms increasingly shifting into retrenchment mode in the absence of clarity about tax and broader economic policy.
An IFOP survey for French debt recovery agency ARC found firms were increasingly trying to hold onto cash by reining in investment, reducing hiring and taking measures to ensure clients pay on time.
