Luxembourgh Times

French economic recovery remains on track

Despite Omicron surge

Paris business district, La Défense

Paris business district, La Défense © Photo credit: Shutterstock

Source: Bloomberg

France’s economic recovery is proving almost immune to disruption from the wave of omicron infections and is set to get extra support as supply constraints start to ease, according the central bank’s monthly business report.

Activity in the euro area’s second largest economy will stabilise in January at 0.75% above pre-pandemic levels, based on results of the survey of 8,500 firms that was conducted just as the daily count of Covid cases hit record highs. Supply snarls are becoming less of an issue with fewer business leaders in both industry and construction reporting an impact on their operations.

The solidity of France’s recovery as the Covid pandemic intensifies is a source of reassurance for policy makers who have said European economies will be increasingly resilient to problems on the public health front. Proving that is particularly crucial for the French government, which faces elections in just three months.

For January, the Bank of France survey indicates a slight progression of activity in industry, stability in construction, and heterogeneity in services with restaurants and catering taking a hit while business services are improving.

Some sectors including automobile production will continue to suffer from supply shortages, but overall those tensions have eased further from a peak in September. The central bank said the improvement is contributing to a stabilization of business leaders’ expectations for prices that is in line with its most recent inflation forecasts.

Still, the survey also showed uncertainty has increased due to omicron.

“Businesses are signalling a significant rise in uncertainty that means their expectations should be interpreted with more caution than usual,” the central bank said.

©2022 Bloomberg L.P.