So far, the global economy has weathered the introduction of massive customs duties by the US administration fairly well. China – the US President's first target – has proved remarkably resilient, rapidly redirecting its sales to other countries and stepping up price cuts on its products with a view to gaining further market share and offsetting the persistent weakness of its domestic demand. On the other side of the Pacific, the US economy is likely to stall temporarily at the end of 2025 due to the six-week-long government shutdown, but it is still likely to be buoyed by solid investment and the favourable effects of tariff protection on domestic production. However, US households are beginning to foot the bill, as the price of imported goods continues to rise. In the great game of world trade, Europe seems to be losing on both counts: access to the US market has been reduced and competition from China has intensified.

However, despite this external headwind, the outlook is brightening for the Old Continent, which is gradually absorbing the effects of the inflationary shock of 2022 and 2023. Domestic drivers – notably investment – are regaining momentum. In European business tendency surveys, manufacturers have been slightly more optimistic about their demand prospects since the summer, and the ECB's past monetary easing is starting to bear fruit. Last but not least, Germany has abruptly changed its fiscal policy orientation, adopting a “fiscal bazooka” for 2026, which, combined with the joint defence effort and the latest disbursements under the European Economic Recovery Plan, is likely to act as a locomotive for the entire continent.

Despite political uncertainties, France has climbed aboard the European recovery train, even becoming one of the driving forces this summer with growth of +0.5%, ahead of forecasts and one of the best in the euro area. The sudden easing of supply constraints in aeronautics boosted manufacturing output (+1.3%) and exports (+4.8%). Corporate investment surged (+0.8%), as elsewhere in Europe, and public consumption did not weaken. The sole persistent downside remains private consumption. Due to their extreme pessimism about the country's future, households barely increased their purchases over the quarter, or even over the year.

The available economic indicators suggest that this improvement is likely to continue: the business climate in France, which has languished at four points below its long-term average since the dissolution of the National Assembly in the summer of 2024, has picked up over the past two months and is now approaching this average. Industrial output did not falter in October, a sign that the gains made over the summer are being consolidated. In industry, enterprises are optimistic about the demand for their goods, and their means of production appear to be increasingly mobilised. Above all, retailers are regaining confidence and consumption seems to be picking up slightly, boosted notably by social leasing schemes in the automobile sector. Moreover, the emerging political compromise is quite favourable to short-term activity: by reducing fiscal consolidation, it limits the negative impact on corporate margins and household purchasing power; by avoiding an institutional crisis, it eases uncertainty. Activity is expected to slow slightly at the end of the year (+0.2%) in a backlash effect, as the outstanding performance of the aeronautical industry in the summer was a one-off occurrence, but growth should stabilise in H1 2026 at a rate close to the average for the 2010s (+0.3% per quarter). French growth (adjusted for working days) should therefore reach +0.9% in 2025, with a mid-year overhang of +1.0% already likely for 2026.

However, this modest cyclical upturn is expected to have little impact on employment. Enterprises remain cautious in their hiring intentions, and are likely to use the recovery as an opportunity to restore their productivity, which is expected to grow significantly faster than its trend rate for the 2010s. In addition, the decline in the number of posts on work-study programmes that began this summer is set to continue. All in all, salaried employment should remain stable year on year to mid-2026 and total employment is expected to increase by around 70,000, but solely due to the momentum generated by micro-enterprise creations. As the pension reform continues to be phased in (the effects of its suspension are not expected to be felt until the end of 2026), which pushes up the labour force, unemployment should rise slightly to 7.8% by mid-2026.

Against this backdrop, wage increases remain limited and the timid resurgence of activity is unlikely to rekindle inflationary pressures. At +0.9% year on year in November, French inflation is one of the lowest in the euro area. Although it is likely to edge up slightly, it should still remain reasonable at +1.5% in June 2026. Despite the increase in pensions and the minimum wage on 1^st January, household purchasing power is likely to be significantly less buoyant than activity (+0.5% in 2025, with a mid-year overhang of +0.4% in 2026) and should even remain unchanged per consumption unit. Wealth has effectively been weakened by the drop in interest rates while taxes are rising, especially on high incomes. Both of these factors mainly affect wealthier households and should therefore have little impact on consumption. Consequently, the savings ratio looks set to fall to 18.0% by mid-2026, compared with the peak of 18.7% reached one year earlier.

This forecast is subject to a number of uncertainties. Internationally, US trade policy appears to have stabilised, but the US administration has backtracked on this subject on numerous occasions, which continues to generate considerable uncertainty, both upside and downside. In a context of massive surplus supply, oil prices could fall and further fuel the European recovery. In France, uncertainty remains high about the precise orientation of fiscal policy: this Economic Outlook, based on information available up to 12 December, assumes a lower level of fiscal consolidation than initially envisaged by the government. A possible special law on the state budget, maintaining appropriations at their 2025 level, would have little impact on the short-term scenario. As far as private agents are concerned, while the upturn in corporate investment seems to be borne out by a range of indicators, the recovery in household consumption is more uncertain. After two years of surprisingly weak fluctuations relative to its usual determinants, this Outlook assumes a return to a normal pace of growth in household consumption in H1 2026, without compensating for its past weakness. This central assumption is subject to two uncertainties: on the one hand, the high savings ratio is an obvious reservoir of growth if confidence were to return; on the other hand, the poor state of the labour market could prompt households to further increase their precautionary savings.