French business activity stable in February, Q1 GDP forecast 0.2-0.3 percent amid rising geopolitical uncertainty

The Banque de France's latest survey, conducted between February 25 and March 4, noted stable economic activity in February, aligning with expectations.

Industry continued its ninth consecutive month above its long-term average, driven by technology sectors.

Services remained robust, slightly exceeding prior anticipations, while construction maintained positive momentum despite a challenging environment.

Cash flow deteriorated slightly due to extended payment delays, and supply difficulties saw a minor increase without signs of lasting deterioration.

Sales prices moderately increased across all three major sectors.

Based on these results, the BDF confirmed a Q1 GDP growth forecast of 0.2-0.3 percent.

This projection, however, carries a downside risk due to uncertainties from the Middle East conflict, which began on February 28, potentially impacting supply chains and energy prices towards the quarter's end.

Approximately one-third of survey responses were collected before this event, with two-thirds after.

For March, businesses anticipated continued strong activity in industry and services, with more limited growth in construction.

However, the initial decline in uncertainty observed in early responses sharply reversed after February 28. Companies now cite risks of rising energy prices and logistical disruptions, particularly affecting the transport sector.

Order books were judged largely depleted across most sectors by the end of February, with construction seeing a significant deterioration for the second consecutive month, linked to electoral context.

The overall uncertainty indicator, derived from textual analysis of company comments, rebounded strongly following the geopolitical event.