France's Economy Hit by Election Uncertainty - Business

French Economy Hit by Election Uncertainty

The French economy has been impacted by President Emmanuel Macron's surprise decision to call for a snap election, new data indicates. Business confidence and private sector output saw a decline in June, as revealed by a survey of approximately 750 major companies in the country. France's services sector, encompassing industries like hospitality and entertainment, also experienced a contraction that exceeded expectations.

Impact on Businesses and Economic Uncertainty

The decision to call for a national poll following Marine Le Pen's National Rally party's success in European elections has caused concern among businesses. The anticipation of the upcoming election, scheduled for two rounds of voting on 30 June and 7 July, has created economic uncertainty. Polls suggest that the National Rally party is likely to secure a significant portion of the vote, with Macron's Together bloc trailing behind.

Some businesses have expressed worries about the election's outcome, leading to economic uncertainty.

Economist Norman Liebke noted that the uncertainty surrounding the elections has caused French businesses to stall, with some attributing lower activity levels to the upcoming political event. Output expectations for the next twelve months have weakened due to higher uncertainty about the election and geopolitical risks.

Concerns Over France's Economic Indicators

Investors are closely monitoring France's economic indicators, with election uncertainty adding to worries about the country's ability to finance its budget deficit. The flash Purchasing Managers' Index (PMI) report by S&P Global showed a decline in business activity in the services sector from May to June, falling below the expected reading for June. A score below 50 indicates a contraction, while a score above 50 signifies growth. The composite PMI, which includes both services and manufacturing, also experienced a decrease from the previous month.

Overall, the French economy is facing challenges as a result of the election uncertainty and its impact on business confidence and economic indicators. The outcome of the upcoming election will be closely watched by investors and analysts to gauge the future direction of the country's economy.