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(Bloomberg) — The Bank of France raised its short-term growth estimate as activity improved in all sectors in June, indicating the economy will safely avoid a recession.
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The central bank said a combination of its monthly business survey and recent hard data show output rose 0.2% in the second quarter. It previously predicted stagnation, which would have brought France close to a recession after a contraction in the first three months of the year.
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There was a clear strengthening in industrial activity in June, while services and construction saw a rebound from May, the Bank of France said.
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The more upbeat outlook provides some relief for the government as it struggles to contain the budget deficit. That challenge has been made more difficult since surging energy prices due to the Iran war fueled inflation and weakened the economy.
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Finance Minister Roland Lescure said this week that the target of a slight reduction in the 2026 gap to 5% of economic output has become “difficult” as he cut the official growth forecast to 0.7% from 0.9%.
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The Bank of France previously projected expansion of just 0.5%. Its chief economist, Xavier Debrun, said the improved second quarter would give a mechanical boost to the full-year number.
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“There’s a positive upside risk for our forecasts for the full year, though it’s not enormous,” he said.
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The Bank of France survey also showed that businesses continue to raise selling prices, but at a slower pace than in May. The monthly uncertainty indicator also eased slightly, returning to levels seen before the Iran war.
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