In June, private-sector activity in France slowed unexpectedly, as businesses expressed concerns about the upcoming elections and the possibility of a radical change in government. The S&P Global’s Purchasing Manager’s Index fell to 48.2, below the 50 threshold that indicates growth, surprising analysts who had expected a slight improvement to 49.4.
After disappointing performance in the European elections, President Emmanuel Macron called for a snap parliamentary vote, causing concern among investors and leading to market turmoil. The far-right and leftist political forces competing for power in the upcoming elections faced skepticism from entrepreneurs in Paris as they presented their plans with little detail on how to address the country’s financial challenges.
The uncertainty around the elections has caused French businesses to stall and fear challenging times ahead. Recently, France was criticized by the European Union for running large budget deficits, potentially leading to significant fines. This has added to the concern among businesses and investors about the future of France’s economy.
Despite this slowdown in activity mainly seen in manufacturing sector while services remained relatively stable but still below growth threshold; economist Norman Liebke predicts that France’s GDP will expand by 0.1% this quarter and anticipates a boost from the Olympics scheduled for July and August. Lower borrowing costs are already giving a lift to the economy, and further rate cuts are expected from European Central Bank this year due to monetary easing measures which will depend on inflation progress towards target of 2%. PMIs are closely monitored as they provide early insights into economic trends and turning points, helping inform predictions for GDP growth
