(Bloomberg) — The French economy will grow only 0.2% in the second quarter after stagnating at the start of the year as companies face increasing difficulty getting supplies following Russia’s invasion of Ukraine, the Bank of France said.
The share of industrial firms reporting supply issues affecting their output rose to 65% in the central bank’s monthly survey, the highest reading in the year since it began the measure. While the proportion fell slightly in construction, more than half of companies in that sector are still having problems.
The “moderate” growth the Bank of France expects will be thanks mainly to the services sector catching up from sluggishness at the start of the year due to a spike in Covid infections. According to the survey of around 8,500 businesses, activity in industry was stable in April and will advance less than in services in May.
The Bank of France’s report echoes the gloomy short-term outlook published by the country’s statistics agency on Monday. That sluggishness is adding jeopardy to the the European Central Bank’s plan to press ahead with withdrawing stimulus to tame surging inflation without inflicting undue damage on the economy.
Still, the Bank of France said that prices are more of an issue than activity, for now. Prolonged pressure from rising raw material prices means businesses are more frequently raising their own prices, particularly in the chemicals, electrical equipment, wood and paper, and agricultural sectors.
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