Key insights
- The Bank of France reports French economic resilience is being tested by Middle East conflict uncertainty and rising energy costs. While industrial output, particularly in defense-related sectors, remains supportive, growth is slowing in construction and stalling in services. Companies anticipate a leveling off or slight decline in activity in May, especially in services, with rising oil prices impacting raw material and transport costs. This could translate to weaker European demand and indirectly impact US multinational earnings.
PARIS, May 12 (Reuters) - French companies have so far absorbed the shock from the conflict in the Middle East, but pervasive uncertainty and higher energy costs are beginning to test the economy’s resilience, the central bank said on Tuesday in its monthly business survey.
The Bank of France said there was so much uncertainty over the outlook that it could not provide its usual growth estimate for the quarter. It said, however, that activity continued to expand in April, albeit more slowly, according to its April 28 to May 6 survey of around 8,500 firms.
Industrial output remained a key support, buoyed by defence-linked sectors such as aeronautics, electrical equipment and electronics, even as growth eased in construction and stalled in services.
Companies reported that production held up better than expected, keeping capacity utilisation close to its long-term average.
Nonetheless, business leaders cited rising uncertainty following the outbreak of the conflict, with higher oil prices feeding through to raw material costs and transport expenses. Supply chain problems have grown worse in energy‑intensive industries, while services exposed to fuel prices - notably transport and logistics - are seeing margins squeezed.
Looking ahead to May, firms expected activity to level off or decline slightly, particularly in services.