Banque de France Forecasts Modest 0.2% GDP Growth in Q3 Amid Heatwave Uncertainties

The Banque de France projects a modest 0.2% increase in France's GDP for the third quarter of 2026, driven primarily by robust activity in the merchant services sector. This forecast stems from a survey of 8,500 businesses conducted between July 22 and August 5, indicating moderate industrial activity and resilience in construction despite sectoral challenges. While industrial production expanded in July, growth was slower, with specific difficulties in clothing-textile and aerospace sectors. Investments in technology, especially in defense and infrastructure electrification, have supported industrial output.

The forecast is tempered by significant risks tied to ongoing and potential new heatwaves, which have exacerbated drought conditions and lowered groundwater levels nationwide. The heatwaves have already led to uneven sectoral effects; for example, while automotive repair services benefited from the tourist season, the restaurant and construction sectors faced challenges due to the heat. Nevertheless, demand for air-conditioning installations helped sustain building activity. Business leaders remain cautiously optimistic heading into August.

This Banque de France outlook slightly surpasses that of Insee, which predicted a 0.1% GDP growth for the same period. Additional uncertainties include limited mid-quarter data and geopolitical tensions in the Middle East, which could impact economic performance. Overall, despite a slowdown in July's business activity, there is anticipation of a slight rebound, with energy expected to recover after half a year of decline.