French Economy Hit by Supply Problems as Activity Nears Normal

French economic activity almost reached pre-pandemic levels in July as businesses largely shrugged off some renewed restrictions while supply difficulties increasingly constrained production.

Activity was between 1% and 1.5% below normal in July, the highest it’s been since the pandemic struck, according to the Bank of France’s monthly survey of 8,500 firms.

Almost There

French economic activity is inching toward pre-pandemic levels

Source: Bank of France

While business leaders expect a similar performance in August, the share of companies reporting supply difficulties rose for the third consecutive month to 49% in July. In construction, the measure was stable at 60%.

The central bank’s survey underscores how the European economies exiting lockdowns and the worst of the Covid-19 pandemic are increasingly running into difficulties ramping up production. The auto industry has suffered particularly from a shortage of semiconductors as order books fill up.

French Constraints

Auto makers face the worst impact from supply-chain difficulties

Source: Bank of France

Businesses are also struggling with bottlenecks that predate Covid-19, including finding and hiring workers. In France, the share of businesses reporting hiring difficulties rose to 48% in July from 37% in May. In services and construction, the share of firms struggling to find workers is above 50%.

Source: French Economy Hit by Supply Problems as Activity Nears Normal - Bloomberg