(Nov 21): Emmanuel Macron’s ill-fated June gamble on snap elections has plunged French businesses into prolonged gloom, clouding the president’s seven-year effort to transform the country into a hub for investment.
Business confidence unexpectedly fell one point in November to 96 as services saw a two-point drop. In manufacturing, the sentiment reading rose four points to 97, recovering only part of the plunge recorded in October and remaining below the indicator’s long-term average of 100 for the seventh consecutive month.
The readings from statistics agency Insee on Thursday add to warning signs from other surveys showing persistently high uncertainty and delayed investment projects.
French business confidence has been in a slump since Macron unexpectedly dissolved the National Assembly in June, leading to elections that returned no clear majority. It took the president two months to appoint a minority government that is now attempting to get an austere budget through a hostile, divided parliament.
Plans for tax increases and spending cuts have come under fire from corporations who say the measures risk backtracking on years of Macron’s pro-business policies that have helped spur job creation and investment. On Sunday, Patrick Martin, the chief of business group Medef, said in Le Parisien newspaper that the fiscal plans, which include temporary tax increases for the largest firms, are “recessive.”
Business investment was already declining before the political difficulties began and is expected to keep contracting at least through the end of the year, according to Insee’s latest forecasts.
Earlier this week, consultancy firm EY published a report showing 49% of foreign investors in France scaled back or delayed their plans following the elections. The top reason cited was legislative and regulatory uncertainty, followed by concerns over a slower agenda for economic reforms.
The investment weakness is also showing signs of spreading to employment with a string of job cut plans announced in recent weeks, including retailer Auchan and telemarketing firm Teleperformance. Unemployment edged up in the third quarter to 7.4%.
Insee’s overall confidence measure showed declines in construction, services, retail and wholesale offsetting the partial recovery in industry. In manufacturing, there was an improvement in most sub-indicators, except the general production outlook.
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