Olympics to Boost French Growth in Third Quarter

The Banque de France expects a significant increase in gross domestic product (GDP) between July and September, with growth estimated to be around 0.4%. This forecast is largely due to the temporary effect of the Olympic Games, which took place in Paris between July 26 and August 11, and the Paralympic Games between August 28 and September 11.

According to Banque de France chief economist Olivier Garnier, the Olympics are expected to add around 0.25% to GDP growth. However, excluding the Olympics, GDP growth would be around 0.1% to 0.2%.

Despite this positive forecast, the Banque de France warns that political uncertainty and the possible side effects of the Olympic Games pose risks to economic activity. “An increase in uncertainty has a negative impact on activity, which in particular creates wait-and-see behavior,” said Mr. Garnier.

Challenges Ahead

The new Prime Minister, Michel Barnier, faces a tight schedule to present the draft budget for 2025, which is due to be presented in the Senedd on October 1 at the latest. The public deficit forecasts for this year and 2025 are threatened with slippage, according to the Treasury.

The National Institute of Statistics (Insee) has lowered its GDP growth forecast for the third quarter from 0.5% to 0.4%, citing political uncertainty and high credit costs as factors weighing on business investments.

Industry and Services

According to the Banque de France, industry and services reported an increase in activity in August, thanks to the Olympic Games and better weather. However, the increase expected for September is lighter, with a possible “backlash” in services.

In industry, order books are seen as declining, with only aeronautics doing well. “It’s a fairly flat encephalogram,” said Mr. Garnier, highlighting a wait-and-see attitude in investment decisions.

In construction, activity fell slightly in August due to more holidays than in previous years, and is not expected to change much in September.

Supply and Recruitment

Supply difficulties are relatively low, except in the car and aeronautics industries. Recruitment difficulties have increased slightly, with 36% of companies reporting difficulties.

Selling prices have become normalized in industry and construction, and are in the process of becoming so in services.