Business climate slightly down
The deterioration was slight in May (from 97 to 96). The more pronounced decline in industry and services was offset by a slight improvement in construction and retail trade. The composite index remained in a corridor between 95 and 98 over the last three quarters, consistent with a weak, but positive growth.
Household confidence deteriorated significantly to 88 in May, compared with 91 in April
The balance of opinion on past living standards is hovering around 20 points below its historical average (around -30 points for the outlook, -5 points over one month and -11 points over three months). The balance of opinion on the outlook for unemployment rose further (+61 in May versus +33 on historical average, +9 points over one month).
Moderate deterioration in the labor market
Payroll employment contracted by 0.1% q/q (-0.3% y/y) in the first quarter of 2025, with job losses particularly in services and construction. However, the unemployment rate remained moderate (7.4%) in Q1 2025, at the same level as in Q3 2023 and Q3 2024. The employment climate, which has been slightly below its historical average (100) since October 2024 (95 in May), points to a continued moderate pace of job losses in the coming months.
Disinflation increasingly pronounced
Harmonized inflation fell to 0.6% y/y in May 2025, dragged down by lower energy prices. Core inflation remains above its pre-COVID level but is below 2%, due to services, where more gradual disinflation accelerated in May.
A slight improvement in growth in Q2 2025?
Growth reached 0.1% q/q in Q1 2025, weighed down by weaker household consumption and exports. Our nowcast suggests a slight acceleration to 0.2% q/q in Q2. This would be supported by a rebound in exports (aeronautics) and public consumption, which was penalized in Q1 by the late adoption of the budget.
