A slow improvement
The business climate indices improved slightly in May for all sectors (industry, services, retail, construction). The economic sentiment index is close to its long-term average (+2.8 points to 98.6). Industrial production recorded a modest rise in Q1 (+0.5% q/q), putting an end to five consecutive quarters of contraction.
Household confidence rose by 3 points in May
This rebound only partially erases the decline of the previous months. Retail sales fell in March (-0.5% m/m) to their lowest level in four and a half years. This has not prevented household consumption of goods and services (national accounts) from rising over the last three quarters (Q3 2024-Q1 2025), with an increase of 0.2% q/q in Q1.
The labour market remains buoyant
The unemployment rate decreased from 6.0% in March to 5.9% in April, the lowest level for over 20 years. Employment remained stable, while the employment rate (15-64 year-olds) dropped very slightly to 62.75%. Basic hourly wages have slowed (3.6% y/y) but are moving well above inflation. They are thus supporting household purchasing power.
Harmonised inflation fell back below 2% y/y in May (1.9%)
It is a result of greater energy deflation (-1.8%) and a slowdown in services (2.6%). Core inflation also went back to 2%. Producer prices slowed, from 3.9% y/y in March to 2.6% y/y in April.
Growth is expected to remain limited and relatively stable throughout 2025
The final estimate for Q1 confirmed a 0.3% growth, highlighting the good performance of investment (+1.6% q/q and a ratio to GDP at its highest since 1996). As in 2024, and despite strengthening, growth should remain below the European average in 2025, before matching it in 2026.
