Business climate remains stable in France in July

INSEE, which summarizes the opinions of business leaders in the main sectors each month, reports that the business climate remained stable in July, with the indicator at 100 points. This trend has been observed since March.


Business climate virtually stable despite uncertainties

According to INSEE, the business climate remained stable in July for the third consecutive month, following a slight deterioration in March. However, economic uncertainties remain.

The economy is marked by high inflation, which is affecting all businesses, particularly the retail sector, which is seeing the biggest increase in bankruptcies.

The slowdown in the real estate market is worrying construction companies, who are anticipating a downturn in their business over the next few months. According to some specialists, a correction in employment in this sector cannot be ruled out.

Last but not least, rising interest rates are complicating matters for companies already under pressure from inflation and fears of recession. On average, the cost of credit has doubled and now exceeds the 3% threshold. A study published by Bpifrance shows that a third of very small businesses cite the cost of credit as an obstacle to investment, compared with 10% a year ago.

The employment climate also held up well in July for the second month in a row. At 106 points, it remains above its long-term average (100). However, this stability conceals a number of disparities. A slight deterioration in the balance of opinion on future headcount trends in the services sector offsets the improvement in the balance of opinion on recent and future headcount trends in the construction and retail sectors.

Contrasting trends by sector

In a press release published on July 20, 2023, INSEE points out that there are major disparities between business sectors.

While the services (102), manufacturing (100) and construction (106) sectors remained stable, the retail sector saw an improvement, rising from 102 points in June to 106 points in July, a development explained by managers' more positive views on the " general outlook for the sector ".

On the other hand, the business climate indicator for wholesalers deteriorated compared with May, due to a drop in opinions about order intentions. It fell from 94 points in May to 92 points in July 2023.

While the business climate remained stable in July, many uncertainties continue to weigh on growth, and disparities persist between sectors. The wholesale sector is more affected by the economic context than the retail sector.