France’s economy seen dodging onset of recession this year

THE French economy will likely keep growing at a meagre pace in the final quarter of this year, staving off a recession that economists expect to engulf Europe as the energy crisis deepens during winter, a Bank of France survey showed.

The central bank's monthly poll of 8,500 firms showed activity advanced in October in both industry and services, and was close to stable in construction. The trend is seen continuing in November, suggesting there'll be a "very slightly positive" reading for fourth-quarter economic output.

"The French ship is resisting in rough weather and is even a little more solid than expected," Bank of France governor Francois Villeroy de Galhau said on Europe 1 radio on Thursday (Nov 10). "But we need to be extremely vigilant and muster the crew because there is so much uncertainty ahead of us."

The assessment is relatively upbeat compared with that of economists who expect a recession to begin with a 0.2 per cent contraction in French output in the fourth quarter, according to forecasts compiled by Bloomberg.

Villeroy said the survey reinforces expectations the French economy won't have a "hard landing." He said it also suggests there's no reason to be more negative about the outlook than the central bank was in its September forecasts, which gave a range of possibilities for 2023 spanning a 0.5 per cent contraction in output to a 0.8 per cent expansion.

The Bank of France survey also showed an easing of supply constraints for factories to the lowest level since the institution began measuring difficulties in May 2021. It indicated inflationary pressures may begin to ease as the share of business leaders planning to hike prices declined in October and is expected to fall again in the industrial sector in November.

Still, the central bank sounded a note of caution as a new question in the monthly survey showed businesses expect the impact on activity from the energy crisis to intensify in the next three months. Their assessment of cash positions also deteriorated to very low levels compared with the average over the last 15 years. BLOOMBERG


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