France's economy is showing signs of strain as business confidence remains muted, with growth stalling and underlying weaknesses deepening, according to the latest analysis from ING.
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In August, the business climate index remained at 96 for the third consecutive month, below its long-term average. 'While stable, it continues to hover below its long-term average, a sign that the economy is holding its breath rather than gaining momentum,' ING noted.
Beneath the headline figures, sectoral performance is diverging. Retail sentiment plunged by seven points in a single month, dragged down by weak order intentions, while construction shows cautious optimism. Industry sentiment remains flat, and services are edging downwards. These indicators, ING said, point to a "relatively flat growth profile for the third quarter of 2025."
Headline GDP growth in the first half of 2025—+0.1% in Q1 and +0.3% in Q2—painted a more positive picture than the underlying reality. "The headline rate masks a more fragile reality: growth has leaned heavily on inventory accumulation," the report warned. Stripping out stock contributions would reveal a contracting economy.
Other key pressures are weighing on the outlook:
- Private consumption and investment are weakening, with households anxious about unemployment and maintaining a high savings rate.
- Labour market conditions are deteriorating, with net job losses in recent quarters and falling employment sentiment.
- Fiscal tightening and political uncertainty surrounding the upcoming budget vote are eroding confidence.
- Trade challenges and a stronger euro mean exports are unlikely to offset domestic weakness.
'We're maintaining a cautious and constrained growth outlook for the French economy for the time being,' ING said, projecting growth of just +0.1% in Q3, +0.6% for the full year 2025, and +0.8% in 2026.
The analysis highlights an economy "moving but without momentum," with limited signs of a near-term rebound. For businesses and investors, the subdued outlook underscores the importance of cautious planning amid ongoing uncertainty in both domestic and global markets.
More information:
ING
www.think.ing.com
