France’s economy appears to have expanded only marginally during the third quarter as services offset weakness elsewhere and elevated energy costs continued squeezing businesses.
The Bank of France estimates gross domestic product increased approximately 0.1% from the previous quarter.
The estimate precedes official third-quarter GDP figures from national statistics agency INSEE, expected on October 30.
Services provided much of the support while manufacturing, construction and agriculture remained weaker.
Businesses are simultaneously confronting higher input costs, particularly for energy, fuel and metals.
Companies in several industries have been unable to pass the full increase in costs to customers, putting additional pressure on corporate margins and cash positions.
Business uncertainty also increased during September.
Higher fuel prices have caused some companies to postpone projects while consumers have become more cautious about spending.
There are nevertheless pockets of resilience.
Aerospace and electrical-equipment producers have benefited from stronger demand, including investment associated with expanding data-center infrastructure.
Industrial production is expected to improve in October, although automotive manufacturing could face disruptions from supply-related shutdowns.
France’s weak growth matters beyond its borders because the country is the euro area’s second-largest economy.
European policymakers are attempting to manage an increasingly difficult combination of elevated energy costs, inflationary pressure and sluggish economic activity.
If expensive energy persists while growth remains close to zero, the trade-off facing the European Central Bank and national governments becomes more difficult.
The October 30 preliminary GDP release will provide the next major test of whether France maintained positive growth through the third quarter or whether economic activity was weaker than the Bank of France currently estimates. (Reuters)
