Bank of France lifts Q2 growth forecast to 0.2% as industry and services hold up

Forecast revision

The Bank of France raised its second-quarter GDP growth forecast to 0.2% on Thursday, up from a previous estimate of zero. The revision follows a monthly business survey of 8,500 companies conducted between 26 June and 3 July, which showed activity improving across all sectors. Chief economist Xavier Debrun called the upgrade "overall good news" and said it could bring annual growth closer to the government's target.

Overall good news, since we had been envisaging zero GDP growth in the second quarter.

The government lowered its own 2026 annual forecast on Tuesday from 0.9% to 0.7%, while the Bank of France maintains its full-year projection at 0.5%.

Sectoral performance

Industry strengthened markedly in June, led by defence, technology, automotive and agri-food. Companies affected by the late-June heatwave adjusted working hours and largely maintained output. Agri-food sales of fresh products, ice cream and drinks rose, while chemicals benefited from orders placed in anticipation of future price increases.

Market services also rebounded. Accommodation with air-conditioned rooms gained from the hot weather, whereas restaurants suffered. Construction activity rose in both structural and finishing works, with air-conditioning installations accelerating.

Supply and prices

Supply difficulties eased slightly in industry, falling to 11% of firms reporting issues from 13% in May. However, bottlenecks remained acute in IT and electronics (18%) and aeronautics (36%). Selling prices rose less sharply in June as raw material and energy costs moderated.

Uncertainty easing

The Bank of France's uncertainty indicator, based on textual analysis of company comments, continued to decline. It has now returned to levels last seen before the Middle East conflict erupted at the end of February.