The Bank of France (central bank) on July 9 forecast that France’s gross domestic product (GDP) growth for the second quarter of 2026 would reach 0.2% quarter-on-quarter, revising upward from a previous estimate of flat growth. Industrial activity expanded across the board in June, with recoveries in the services and construction sectors accelerating economic growth. The first quarter had recorded negative growth of 0.1%.

Xavier Debrun, the central bank’s chief economist, described the revision as “broadly good news, since our previous estimate had projected zero growth for the second quarter.”

This upward revision could bring the full-year 2026 growth rate closer to the government’s forecast. The French government on July 7 had just lowered its 2026 growth forecast from 0.9% to 0.7%, while the central bank maintains its outlook at 0.5%.

Heatwave Impact and Corporate Adaptation

According to the central bank’s monthly business sentiment survey conducted from June 26 to July 3, covering 8,500 companies, businesses were able to maintain overall activity levels despite a record-breaking heatwave in late June by shifting working hours away from the hottest periods. While some construction projects experienced delays and factory operating schedules were adjusted, major disruptions were largely avoided.

The central bank noted that “companies affected by the heatwave in late June were able to modify their working hours and broadly maintain their activity levels.”

The heatwave also brought benefits to certain sectors. Demand for accommodation with air-conditioned rooms increased, and orders for air conditioning equipment expanded. In the construction sector, installation of air conditioning systems accelerated not only in structural works but also in interior finishing.

Sector-by-Sector Trends

The main driver of the upward revision was the strong performance of the services sector. Consumer services, information and communications, accommodation, and transportation all posted gains. In the food and beverage industry, sales of fresh produce, ice cream, and beverages were robust. The chemicals industry also continued to benefit from sustained orders driven by anticipation of future price increases.

Manufacturing also provided support. Activity clearly strengthened in June across defense, technology, automotive, and food processing segments. Meanwhile, the construction sector is expected to contract once again.

Looking ahead to July, business executives anticipate “further progress in activity,” though at a more moderate pace in manufacturing and services, and considerably weaker in construction.

Supply Constraints and Price Trends

On the supply side, pressures from supply chain issues and raw material and energy prices have eased from their peak earlier this year. However, supply difficulties remain “severe” in certain sectors. The proportion of companies reporting supply difficulties across manufacturing fell from 13% in May to 11% in June, but remained elevated at 18% in computers and electronics and 36% in aerospace.

Against a backdrop of stabilizing raw material and energy prices, the rise in selling prices in June was more moderate than the previous month.

The uncertainty indicator, derived from textual analysis of corporate comments, has continued to decline, returning to levels seen before the Middle East conflict erupted in late February. Nevertheless, business executives still cite international tensions as a source of concern.

While acknowledging the recovery in services and manufacturing behind this upward revision, Debrun maintained a cautious stance on the full-year growth outlook. The central bank’s 0.5% forecast, compared to the government’s 0.7% projection, reflects the uncertainty in the international environment and weakness in the construction sector.