Economic activity in France is still resisting, but concerns are mounting

Posted Oct 20, 2022, 6:20 PMUpdated Oct 21, 2022 8:59 AM

In these difficult times, positive news is welcome. Despite galloping inflation and the energy crisis, economic activity in France is still showing great resilience. This Thursday, several indicators came to confirm it while underlining the rise of uncertainties for the future.

Thus the business climate measured by INSEE remained stable in October. At 102, it remains slightly above its long-term average which stands at 100. Only services are posting a slight drop in speed (- 1 point) anticipating a slowdown in demand in the current context of rising prices . On the other hand, confidence has improved in construction, where it shows very high levels (115).

Sector differences

And the good surprise comes from the industry where after three months of decline, the climate rebounded to 103, carried by the positive view of business leaders on their production and their future order books. However, this improvement masks sectoral differences. While an upturn is finally taking shape in the automotive and “other transport equipment” sectors, on the other hand morale is withering within energy-intensive industries such as chemicals (87), the rubber industry and plastic (94), or that of wood printing paper (97).

The new edition of the barometer carried out by the Arc firm and the Ifop polling institute with 523 companies with more than 50 employees also offers a reassuring picture with regard to activity. Although the economic situation is less favourable, 61% of respondents expect it to be maintained. The period of euphoria, on the other hand, is well over. Less than a quarter expect their business to grow over the next six months, compared to 45% at the same time last year. In addition, twice as many companies (15%) anticipate a decline.

Deterioration of cash positions

Like the CPME, Denis Le Bossé, president of the Arc firm specializing in debt collection, warns of the deterioration of cash positions: “Bercy must protect companies from the explosion in energy costs. In particular, vulnerable VSEs and SMEs, which lack equity, ”he pleads. It is, according to him, the survival of part of the French economic fabric while 40% of respondents believe that their customers no longer have the means to meet their debts (PGE, investment, etc.), against 25% a year ago.

“Companies with full order books are disappearing because they have consumed their PGE and have not obtained new financing”, worries Denis Le Bossé.

In this context, most companies (80%) expect payment terms to become the adjustment variable, even if they are down to twelve days. A subject of concern to which the Minister of the Economy, Bruno Le Maire, guest of honor of the Arc company, responded by opening the door to the creation of a notation of payment deadlines. A strong expectation.

The stakes are high, according to the barometer: 91% of companies believe that non-compliance with payment deadlines endangers the health of companies, a situation “which could go as far as filing for bankruptcy”.

In front of this audience, the host of Bercy was also proactive on the inflation front. “My goals, and these are just goals, not forecasts, is to bring inflation down to 5% at the start of 2023, then 4% at the end of 2023 and 2% in 2024,” he said. come true, that would be great news. INSEE, for its part, anticipates a rate of price increase of 6.4% at the end of the year. “In the event of a crisis, everything could be shattered,” warned Bruno Le Maire.

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