Banque de France sees French economic activity growing slightly in the first quarter

According to an initial estimate by the institution, the gross domestic product (GDP) would increase by 0,1% to 0,2% between January and March, in line with the growth observed at the end of 2024, if we exclude the negative effect of the aftershocks of the Paris Olympic and Paralympic Games.

The monthly economic survey conducted from January 29 to February 5, the day before the final adoption of the State budget in Parliament, confirms the trend of "slightly increasing activity, even if it fluctuates a little from one month to the next", declared the chief economist of the Banque de France, Olivier Garnier, to the press.

According to the National Institute of Statistics (INSEE), GDP contracted by 0,1% in the fourth quarter of last year, partly due to the impact of the Olympic Games which had significantly boosted growth in the previous three months.

Slump

In January, the approximately 8.500 companies surveyed reported stronger-than-expected growth in activity in industry, market services and construction.

The automotive sector, in particular, benefited from a catch-up effect after longer-than-usual closures in December. Conversely, the metal industry is in decline.

February, on the other hand, would be marked by a slowdown. Activity would slow down significantly in services and would stabilize in industry, where aeronautics would progress unlike chemicals and metallurgy.

Activity would decline slightly in the construction sector, where companies report "demand that remains very cautious, both in terms of individual and collective housing and public orders", Mr. Garnier stressed.

Order books are still considered bare, and noticeably low in the automotive, plastics and metallurgy industries. Only aeronautics is doing well.

Thus, the Banque de France's uncertainty indicator, based on a textual analysis of company comments, has risen, especially in the construction sector where it has reached a peak since March 2022, just after the Russian invasion of Ukraine.

"Among the factors cited by construction companies, there are uncertainties about schemes such as MaPrimeRénov' and the zero-rate loan, in a context which was still one of budgetary uncertainty" before Parliament gave the budget the green light, "as well as a certain wait-and-see attitude on the part of customers", explained the chief economist of the Banque de France.

trade war

Trade tensions with the United States, where Donald Trump is threatening to increase tariffs on European imports, are another source of uncertainty.

In a new phase of the trade war he has waged since taking office, that threat began to materialize Monday when the U.S. president signed executive orders imposing 25% tariffs on imported steel and aluminum starting March 12, "without exceptions," he said. The European Union has promised a firm response.

For the whole of 2025, the Banque de France expects GDP growth of 0,9%, like the government of Prime Minister François Bayrou.

For its part, the INSEE sees GDP increasing by 0,2% over each of the first two quarters, the horizon of its forecasts.

On the price front, after the strong inflation of the post-pandemic period, the Banque de France reported a normalization: the proportion of companies having increased their prices in January is "close to or lower" than that of the pre-Covid period.

Recruitment difficulties have also decreased, cited by only 26% of companies (-4 percentage points compared to December). Despite job losses and a deterioration in the labor market, the unemployment rate in France fell very slightly by 0,1 points in the last quarter of 2024, to 7,3% of the active population, according to INSEE.

Illustrative image of the article via Depositphotos.com.