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Business leaders’ morale is holding up despite growing doubts about the future


Posted Nov 24, 2022 10:12 AMUpdated on Nov. 24, 2022, 9:13 p.m.

“We have an economy that resists and turns,” welcomed the Minister Delegate of Public Accounts, Gabriel Attal, Wednesday on France Inter. This is also what business leaders think. Despite the war in Ukraine, persistently high inflation, the energy crisis and ever-decreasing global growth prospects, their morale is still strong.

The indicator published on Thursday by INSEE, which summarizes the business climate, did not change one iota in November and remained for the third consecutive month at 102 points, ie “slightly” above its long-term average.

Trust does not break

It is even improving in wholesale trade and remains surprisingly high in the construction sector or in services, despite a slight dip. As for industry, it admittedly shows a drop in morale, but confidence is not breaking, the indicator remaining above 100. Opinion on personal production prospects for the next three months even progresses by 5 points in the manufacturing sector.

After having been forced to run their tool in slow motion due to shortages, the leaders hope to finally see the end of the tunnel. “The share of industrial companies declaring supply difficulties as a factor limiting production decreased for the fourth consecutive month and fell to 33%”, points out INSEE.

At 108, the employment climate also reflects the resistance of the French economy as well as the solidity of companies which continue to hire. The good performance of employment contributes to maintaining activity.

Gloomy outlook

The survey by the Statistical Institute, however, reveals signs of concern about the future. Manufacturers point to a very high level of uncertainty and a deterioration in order books in France and abroad. And in services, the bosses are a little less optimistic about the evolution of demand.

At the end of the year, the outlook for the French economy has become more gloomy. For Bercy as for the OECD, France should escape a recession – even two-quarter technical – despite the cold snap that is looming around the world. The government is thus counting on a growth in activity of 0.2% in the last quarter of 2022, identical to that observed during the summer, then on a growth in GDP of 1% next year. “This forecast is considered credible by the IMF”, which forecasts a 0.75% increase in GDP, underlined Gabriel Attal.

more difficult environment

But most economists are more pessimistic. According to INSEE, growth in the last three months of the year should be zero. “The French economy will experience a shallow recession which will be followed by a modest recovery due to the structural weakness of demand”, judge the economist Ricardo Marcelli Fabiani at Oxford Economics who sees activity in France contract in the fourth quarter of 2022 as well as in the first quarter of 2023.

Either way, the environment will get tougher for businesses next year. “By its duration and its scale, the energy crisis darkens their conditions of activity”, writes Bruno Cavalier, chief economist of Oddo BHF in a recent note. INSEE notes that more and more managers want to pass on these increases to their selling prices. But it is likely to be more difficult than in 2022.

“At the end of the Covid crisis, companies were able to pass price increases because the priority for the customer was to be able to obtain supplies. For that, he was ready to pay the price”, explained to the Days of the economy Olivier Garnier, director general of statistics, studies and international affairs of the Banque de France.

Since then, the situation has changed: the bottlenecks are being reduced, the fall in demand will also make it more difficult to raise prices. On the other hand, wages are accelerating.

For Olivier Passet, director of economic syntheses at the firm Xerfi, the rest is written: “We will switch to a second phase, where competitive pressures and the fight for market share will be reborn and where employment will toast. »

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