Key insights
- The Bank of France projects 0.3% Q1 growth, driven by pre-price hike orders and strong manufacturing in specific sectors. However, rising uncertainty due to the Middle East conflict and renewed supply chain issues, particularly in petroleum-reliant industries, are causing concern. A significant increase in firms planning price hikes in April signals potential inflationary pressures. This could lead to tighter monetary policy in Europe, indirectly impacting US markets.
PARIS, April 13 (Reuters) - France’s economy grew marginally faster in the first quarter as some businesses rushed to place orders ahead of expected price rises following the outbreak of war in the Middle East, the central bank said in its monthly outlook.
The euro zone’s second-biggest economy likely grew 0.3%, up from the final quarter of last year when it had expanded 0.2%, the Bank of France said, offering a forecast in line with previous estimates.
The outlook supports the central bank’s view that the economy will grow 0.9% this year "despite all the uncertainties linked to the conflict in the Middle East," Governor Francois Villeroy de Galhau said.
Drawing on its monthly business climate survey of 8,500 firms, the central bank said activity held up in March across industry, services and construction with factory output outperforming business expectations from the previous month.
Manufacturing was bolstered by strong momentum in aeronautics, nuclear power and defence, while services and building activity also remained broadly supportive.
However, the central bank warned that the conflict in the Middle East was weighing on sentiment. Businesses were more cautious when assessing April, with uncertainty indicators rising sharply to levels last seen during the early months of Russia’s invasion of Ukraine.
Villeroy also flagged renewed supply-chain strains, particularly for companies reliant on petroleum-based products such as plastics and solvents, as transport disruptions and higher energy costs rippled through parts of industry.
"More firms are signalling that they will increase prices in April," he said. While around 11% of industrial companies raised prices in March, in line with historical norms, that share was expected to rise to 23% this month, the survey found.