The French economy holds on to growth as energy concerns mount

The French economy appears to be coming through the end of the year undamaged in production, even as business leaders are concerned about the increasing impact of rising energy prices on their operations.

The Bank of France’s monthly survey of 8,500 companies pointed to a 0.1 percent expansion in the fourth quarter after activity improved more-than-expected in November across all sectors. Services are expected to grow again this month, while industry stabilizes and construction slows.

“If I had to summarize the situation, I would say it is continued resilience but greater uncertainty and heightened vigilance,” Bank of France Governor Francois Villeroy de Galhau said in an interview with France Info Radio on Friday.

The central bank’s longer-term projections, released in September, called for no growth in the final three months of 2022.

The latest assessment is relatively optimistic compared to a median forecast by analysts that France will end the year down 0.2 percent quarterly. The S&P Global Purchasing Managers’ Index for November shows that a recession is already underway in the 19-nation euro zone.

The Bank of France survey also showed that supply tensions have eased over the past month, reaching the lowest levels in industry and construction since tensions began being measured in May 2021.

Nonetheless, central bank measurements of the impact of rising energy prices point to major headwinds early next year. Of the business leaders surveyed, 24 percent said the energy crisis is already having a significant impact on business operations, while 35 percent expect a slump in the next three months.

After the French economy was expected to grow by 2.6 percent this year, Villeroy said growth in 2023 is likely to be only slightly positive.

“I can’t rule out a recession, but it’s not our central scenario,” he said. “If there were to be a recession, it would be temporary and limited.”

The governor expects a more normal situation with “less inflation and more growth” to return in 2024. The French economy holds on to growth as energy concerns mount

Fry Electronics Team

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