The decline in the French industry is not dramatic, but the economic view is getting darker
Industrial production is quite good despite a decline
According to data issued by Insee, French industry output fell 1.1% in July, but this decline followed a sharp increase of 3.7% in June, driven by space and flight manufacturing surges. Production of production in the category of “Other Transportation Equipment”, fell 16% in July after jumping 26.1% the previous month, highlighted the momentum of uncertain sectors. However, a broader picture is more convincing: The level of production in all industrial sectors remains above which is seen in May.
Over the past three months, industrial output is 0.6% higher than the average for the previous three months and 0.8% above the same period last year. Even the construction, which has been struggling for a new -newest, posted an increase of 0.6% in July. However, it remains 3.6% below its level a year ago.
Economic momentum may weaken
These numbers indicate a good beginning for the third quarter, but the underlying economic momentum is weak. Consumption of household goods dropped sharply in July, and business sentiment remained calm. Political uncertainty adds to the glory. Since the announcement of the voting trust on August 25, uncertainty has increased. While the updated trust indicator is not yet available, the decline seems possible.
Investment, recruitment and consumption decisions can be postponed, more slowing down economic activities. Increased market interest rates increase financing costs, affecting several sectors such as real estate and construction. After a rather positive quarter, stagnation looks more likely in the last month of this year.
Annual GDP growth is expected to slow down to 0.6% in 2025, down from 1.1% in 2024. That leaves the starting point for 2026 in the shaky soil, with the possibility of fixed growth below potential. Political instability is likely to continue to burden the French economic view in the next place, and growth is expected to remain below the average European. This continuous weakness will continue to burden public finances.
Source: Ing
