The Bank of France reported in its monthly business survey that French companies have, so far, managed to resist the immediate economic fallout from the Middle East conflict, but growing uncertainty and higher energy bills are beginning to strain the economy's resilience.
In an unusual step, the central bank said uncertainty about the outlook was sufficiently elevated that it could not publish its customary growth estimate for the quarter. The assessment was based on responses from around 8,500 firms collected between April 28 and May 6.
According to the survey, overall activity continued to expand in April, although the pace of growth moderated compared with previous months. The manufacturing sector remained the main source of momentum. Within industry, defense-related segments - including aeronautics, electrical equipment and electronics - were singled out as supporting output.
By contrast, the construction sector saw growth decelerate, and the services sector recorded a halt in growth. Firms reported that production outperformed their expectations, and capacity utilization stayed close to its long-term average, indicating that industrial plants were not operating far above or below typical levels.
Business leaders participating in the survey pointed to a rise in uncertainty after the conflict broke out. They reported that higher oil prices have translated into greater costs for raw materials and transport. Supply chain difficulties have become more acute for energy-intensive industries, the survey found.
Services that are sensitive to fuel expenses - particularly transport and logistics businesses - are facing narrower margins as a result of these higher costs. The Bank of France's commentary underscores that while firms have so far absorbed initial shocks, evolving energy costs and the elevated level of uncertainty complicate near-term outlooks.
The survey's findings led the central bank to refrain from making its standard quarterly growth projection, reflecting the difficulty of forming a reliable estimate amid changing conditions reported by firms.