Bank of France downgrades growth outlook as consumer caution deepens

The revision follows a string of downward adjustments from both the government and the national statistics office, INSEE. While the euro zone’s second-largest economy finds some support in resilient global trade, domestic activity remains hampered by the lingering effects of the energy price shock. Households are currently seeing their purchasing power contract, a trend expected to persist until a projected recovery begins in 2027.

Inflation is tracking toward 2.3% this year, though the central bank anticipates a retreat below the 2% threshold by 2027. Despite these projections, the outlook remains precarious. The Bank of France specifically flagged the conflict in the Middle East as the primary threat to stability, noting that any further volatility in oil and gas prices could push the economy into a contraction. Meanwhile, a monthly survey of 8,500 executives suggests only marginal growth of 0.1% for the third quarter, underscoring the fragile state of the recovery.