Uncertainty in French business has increased during the turbulent elections


(Bloomberg) — Uncertainty among French entrepreneurs has increased amid snap elections, with companies worried about investment and the potential for rising labor costs, the central bank’s monthly survey showed.

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The July reading, based on a text-mining of business leaders’ reactions, reached the highest level since the 2022 energy crisis in industry, the Bank of France said on Wednesday. The services gauge was the highest since 2021.

While the survey of 8,500 companies showed no clear deterioration in activity, there were signs of an expected slowdown in cyclical sectors including temporary employment and transportation.

The poll was completed before the final round of voting, when it was still unclear which parties would have influence on future economic policy. Some campaign promises, such as a sharp increase in the minimum wage or reversing a rise in the retirement age, were aimed at President Emmanuel Macron’s pro-business agenda.

“Many business leaders are expressing concerns about the uncertainty of national politics,” the central bank said. “They cite a wait-and-see attitude from customers, delayed investments, including those from abroad, and frozen hiring plans due to the visibility of possible changes in the cost of salaries.”

The election ultimately produced a hung parliament, leaving parties deeply divided as they try to negotiate how to form alliances that can pass legislation. Macron said Wednesday he would set aside time for talks before naming a prime minister.

“The impact on activity will depend on the duration of the uncertainty, and no one knows at the moment,” said Olivier Garnier, chief economist at the Bank of France.

Still, the central bank said its poll, combined with other indicators, showed the economy likely grew 0.1% in the second quarter. It had previously forecast growth between zero and 0.1%.

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