France industrial weakness increases the risk of stagnation

Key arguments

• August's 0.3% manufacturing rebound was too concentrated, driven by other industrial products (+1.2%) and electrical/electronic equipment (+0.9%), while transport equipment (-2.2%) and food processing (-1.2%) contracted.
• The underlying industrial trend remains negative, with manufacturing output down 1.9% over three months, and total industrial production fell 0.3% in August versus consensus of +0.2%.
• Rising interest costs — projected at €91bn in 2027, above the government's 4.3% OAT yield assumption — will weigh on housing and corporate investment and reinforce wait-and-see behaviour.
• Even if adopted, the budget with €43bn in measures is unlikely to bring the deficit to 5% of GDP in 2027 due to weaker growth and higher interest costs, and uncertainty will persist until the presidential election.

Corresponding source evidence

1. With budget uncertainty and tightening financial conditions, the French economy remains at risk of stagnation French manufacturing output rose by 0.3% in August A modest manufacturing rebound After falling by 0.8% in July, manufacturing output rose by 0.3% in August.
2. The rebound mainly came from the manufacture of “other industrial products”, which increased by 1.2%, and electrical, electronic and computer equipment, where output rose by 0.9%.
3. The result is all the more disappointing as the consensus had expected an increase of 0.2%.