French Business Uncertainty Surged During Turbulent Election

(Bloomberg) — French business uncertainty surged during snap elections as firms worried about investment and the potential for labor costs to jump, according to the central bank’s monthly survey.

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July’s reading, based on a text-mining of responses from business leaders, reached the highest level since the 2022 energy crisis in industry, the Bank of France said Wednesday. The services gauge was the most since 2021.

While the poll of 8,500 companies didn’t show a marked deterioration in activity, there were signs of an expected slowdown in cyclical sectors including temporary work and transport.

The survey was completed before the final round of voting, when it was unclear which parties would have sway over future economic policy. Some campaign pledges, such as a sharp increase in the minimum wage or undoing an increase in the pension age, targeted President Emmanuel Macron’s pro-business agenda.

“Many business leaders are expressing their concerns about the uncertainty of national politics,” the central bank said. “They mention a wait-and-see attitude of customers, delayed investments, including those from abroad, as well as frozen hiring plans due to visibility on possible changes in the cost of salaries.”

The elections ultimately delivered a hung parliament that’s left deeply divided parties trying to negotiate how to form alliances capable of passing legislation. Macron said Wednesday that he’d leave time for talks before naming a prime minister.

“The impact on activity will depend on the duration of uncertainty, and nobody knows at this stage,” Bank of France Chief Economist Olivier Garnier said.

Still, the central bank said its poll, combined with other indicators, showed the economy probably expanded 0.1% in the second quarter. It had previously forecast growth between zero and 0.1%.