PARIS (Reuters) – The Banque de France (BdF) expects gross domestic product (GDP) growth to rise by 0.1 percent in the second quarter, based in particular on its monthly business survey of 8,500 business leaders.

The survey was conducted at a time of uncertainty for France, half before the first round of early legislative elections won by the National Rally (far right), and half before the second round of voting won by the left-wing alliance of the New Popular Front, which promises a radical break with the economic policy of the outgoing government.

This deep uncertainty caused by President Emmanuel Macron’s decision to dissolve the National Assembly after his party’s failure in the European elections has not changed the forecasts of the Banque de France, which a month ago expected growth of between 0% and 0.1% in the second quarter, after 0.2% during the first three months of the year.

“The effect of political uncertainty would rather play out from the third quarter, with transitory positive effects for the third quarter of the Olympic Games in Paris,” stressed Olivier Garnier, director general of statistics at the Banque de France, during a call with journalists.

According to the BdF survey, activity increased slightly in June in market services, and more significantly in industry and construction after a slow month of May due to numerous public holidays.

“This relatively modest increase in activity [au deuxième trimestre] could be explained in particular by an unfavourable calendar effect in May and a moderate rebound in activity in June”, the institution emphasises.

Business leaders surveyed by the central bank are less optimistic for the month of July “in a context deemed to be largely more uncertain”, says the BdF, with an expected increase in activity in industry but a contraction in the construction sector after the rebound in June and activity still sluggish for market services.

On the inflation front, the BdF notes that the moderation of sales prices continues, with only 5% of manufacturers having declared having increased their prices in June, while an equivalent proportion said on the contrary that they had lowered them.

This trend remains fragile, however, she notes, because “after an almost continuous decline since spring 2023, the prices of raw materials are considered to be rising again by business leaders”.

In this tense context, supply difficulties persist for companies, particularly in the transport sector for components such as microprocessors, and to a lesser extent in industry (12%, up one point compared to May).

(Written by Tangi Salaün, with Sudip Kar-Kupta, edited by Blandine Hénault)

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