Signs of Economic Recovery Amid Caution: France's Mid-2025 Overview
France shows early signs of economic recovery in mid-2025, though caution remains as inflation persists.
Key Points
- • M3 money supply increased by 2.3% year-on-year in May 2025, indicating more funds circulating.
- • Credit to non-financial companies rose by 2.1%, marking the strongest growth in over a year.
- • Household deposits at sight rose by 1.5%, while term deposits fell by nearly 9%.
- • Occitanie's economic activity slightly contracted, with employment down by 8,900 jobs compared to last year.
As of July 1, 2025, the French economy is exhibiting signs of a cautious recovery following two years of stagnation impacted by an energy crisis and inflation, according to the latest report from the Banque de France. The report highlights a 2.3% increase year-on-year in the M3 money supply as of May 2025, indicating a larger circulation of money in the economy compared to just a 0.2% rise observed in April 2025. This uptick may suggest potential growth in consumer spending and business investments, although economists urge caution given persistent inflationary pressures.
Credit to non-financial companies showed a promising increase of 2.1%, amounting to nearly €29 billion, marking its highest growth in over a year. The Banque de France attributes this rise to firms adapting to high-interest rates in a bid to stimulate investment, with hopes that it could lead to a revitalization of production capabilities and employment levels. The French Banking Federation has voiced a positive perspective on this credit growth, indicating it could potentially aid modernization efforts across sectors.
On the household front, deposits at sight have risen by 1.5%, signaling a shift in consumer behavior towards maintaining liquidity in uncertain times, while term deposits notably dropped by nearly 9%. Despite these encouraging indications, the projected GDP growth for 2025 remains modest at just +0.6%, suggesting that while there are signs of recovery, inflation is absorbing much of this monetary flow and casting shadows over external trade performance and energy costs.
In contrast, the region of Occitanie has reported a slight contraction in economic activity, with employment decreasing by approximately 8,900 jobs year-on-year. The local sectors tied to household consumption, such as commerce and leisure, experienced declines, and the construction sector has struggled significantly, with housing starts down by 11.3%. Although new business registrations remained substantial at 25,700 for Q1 2025, the region faced increased business failures, with 6,000 closed businesses marking an 8.2% rise compared to the previous year.
As France navigates these mixed indicators, economists like Philippe Martin warn of the fragility of the recovery. While initial signs of momentum might be observable, translating this growth into sustained economic development will be vital for overcoming ongoing challenges in both national and regional contexts.