This positive economic picture largely holds in spite of significant global headwinds, with France coming through the first half of 2023 with a fairly robust performance. The country’s gross domestic product (GDP) increased by 0.1% in the first quarter, followed by a more robust growth of 0.3% in the second quarter. However, underlying indicators reveal troubling trends, particularly in business and retail sentiment, which have raised concerns about the sustainability of this growth.
The increase from stock investments was the biggest driver behind this brilliant economic performance. In the first quarter, contributions from stocks raised overall growth by 0.7 percentage points. In the second quarter, this stimulus abated somewhat to 0.5 percentage points. In spite of these beneficial overall positive net contributions, the summary or composite business climate index for France remained at 96 for August. That’s its third month in a row at this level. This historical stagnation indicates that businesses continue to struggle with uncertainty, weighing down their sentiment and willingness to invest.
Retail Sentiment Declines Sharply
The most recent data shows that retail sentiment in France is taking a nosedive, falling by seven points in a single month. This decline comes from worsening outlooks among store-based retailers and poor order plans, a troubling sign for consumer spending. As business responds to these pernicious signals, the retail sector will be left with increasingly difficult questions on how to stay afloat.
The National Institute for Statistics and Economic Studies (INSEE) has confirmed a drop in employment expectations for the month of August. This story adds to the deepening picture of a labor market in turmoil. After several quarters of overall net job loss, this geographical change in the employment landscape could further erode consumer confidence and increase spending power. The gap between sectors is widening, as some industries thrive while others flounder in these arduous times.
Economic Outlook and Projections
ING economists see France’s economy growing by 0.1% in the third quarter of 2025. In addition, they project only 0.6% growth for all of 2025. These forecasts display a note of cautious optimism but highlight the fragile state of our current economic landscape. The outlook for 2026 looks a bit better at 0.8%. Nonetheless, analysts warn that without several mitigating factors, France’s economy would have likely faced contraction rather than growth.
The uneven progress among different industries suggests a fragile state of prosperity at the national level. Other regions flourish with the right long-term strategic investments and market-based demands. In contrast, many others are still reeling from the effects of lost consumer confidence and tsunami of uncertainty. As these trends play out, everyone from investors to policymakers to competitors will be looking to see how businesses meet these challenges and opportunities.