France’s economic growth is projected to be modest in Q4 2024, primarily influenced by a post-Olympics rebound, despite a potential GDP decline of -0.2 percentage points. The services sector thrived during the Olympics, contributing to a 1.1% growth forecast for the year. However, sectors like automotive face challenges. Business leaders express concerns over national policies and geopolitical instability, while the government plans a €60 billion budget effort for 2025, aiming to stabilize public finances amid a tense economic environment.
Economic Outlook for France in Q4 2024
The Bank of France has projected modest economic growth in the fourth quarter of 2024, influenced by the post-Olympic “rebound.” This cautious outlook reflects a climate of uncertainty, with the bank indicating that while economic activity is anticipated to see a “slightly positive” uptick from October to December, this growth will be mitigated by an estimated negative impact of -0.2 percentage points on GDP resulting from the Olympic aftermath. The bank’s monthly economic survey did not provide a specific growth estimate for this period.
Sector Performance Analysis
In the third quarter, the Olympics contributed to a growth rate of +0.4%, particularly benefiting the services sector through increased ticket sales and broadcasting rights. For 2024 as a whole, the Bank of France predicts a growth rate of 1.1%, in line with expectations from the government and the National Institute of Statistics (Insee), which forecasts no growth for the final quarter.
The economic survey, which engaged around 8,500 companies between October 29 and November 6, revealed positive activity in the industrial sector for October, buoyed by aeronautics and agri-food industries. Conversely, the automotive sector continued to face challenges, particularly in electric vehicle production, which is struggling due to competition from China and a drop in consumer demand. The Bank of France noted that industrial order books remain “thin,” except in aeronautics.
Merchant services have experienced a slowdown, while construction has seen some recovery with major projects resuming after delays related to the Olympics. The Bank of France forecasts that activity in industry and services will “barely” change in November, with a decline anticipated in construction. The monthly uncertainty indicator derived from company feedback remains “relatively high across all sectors.” Business leaders express concerns about national economic and fiscal policies, along with geopolitical instability, particularly ahead of the U.S. elections, which has led to a hold on many investment initiatives.
In the services sector, temporary employment has decreased for the second month in a row, primarily due to caution amid the prevailing uncertainty. In construction, clients are delaying decisions as they await updates on the “MaPrimeRénov'” program associated with the discussions surrounding the 2025 budget.
The government aims to implement a €60 billion budgetary effort for 2025 to stabilize public finances, which includes a reduction in subsidies for energy renovation of housing from €4 billion to €2.3 billion for 2025. Recently, the National Assembly dismissed a revised legislative text from the left, which will now progress to the Senate. This lack of visibility contributes to an economic atmosphere expected to be tense in the closing months of the year, with notable social plans at Michelin and Auchan, alongside a wave of strike actions.
Industry Minister Marc Ferracci indicated that further site closures may be anticipated in the near term. According to CGT’s general secretary, Sophie Binet, the industrial sector may face “violent industrial bleeding,” with potential job losses exceeding 150,000. On the pricing front, the situation has stabilized, returning to pre-COVID levels in October, leading the French central bank to assert that inflation should remain under control. Recruitment challenges have also eased, with 31% of firms reporting difficulties in October, down from 35% in September, while supply issues have remained stable at 10%, although they are more pronounced in the aeronautics (37%) and automotive (16%) sectors.