Economy holds its breath, elections weigh on bosses’ optimism

This election period is putting the economy on hold, business leaders assure us. Following the results, they fear, in particular, a questioning of supply-side policy or an increase in taxation.

Business France is frozen, suspended in the legislative elections, the second round of which will take place on Sunday, July 7. The wait-and-see attitude of the real estate market extends to all sectors of the economy. In companies, since the dissolution, investments have been put aside, hiring frozen, new projects postponed, events and seminars are cancelled. According to François Asselin, the president of the CPME, the employers’ organization that represents small and medium-sized businesses, the shutdown is such that “we have already lost a quarter of growth“, he said in an interview on Wednesday, July 3.

Private sector activity, for example, which is measured by the SME/PMI index (which takes into account both the manufacturing and services sectors) was published on Monday. This indicates that it contracted slightly in June, falling just below the 50 mark, a small signal that shows how much the elections weigh on the optimism of bosses. However, confidence, an essential element in the economy, has taken a hit.

The bosses are worried and are waiting for the political situation to resolve itself. Following the results, they fear a questioning and abandonment of the supply-side policy, favorable to businesses, that Emmanuel Macron led. They are also afraid of an increase in taxation on individuals and companies. They are also sorry to see that the texts they were waiting for, for example, the law on simplification, have fallen by the wayside with the dissolution, the same for the reform of unemployment insurance.

At the same time, the markets themselves have not moved much this week. There is already relief because since Sunday evening’s results, their main fear has been dispelled: that of a forceful arrival, with an absolute majority, of the New Popular Front. The left-wing alliance is perceived as very anti-business and investment. Foreign investors say to themselves that even with the strong rise of the National Rally, France will remain governable, like America under Trump or Giorgia Meloni’s Italy. And since Wednesday, with the withdrawals and the attempt to form a Republican front, investors see the possibility of an absolute majority of the RN moving away, which reassures them a little. On Wednesday evening, the Paris Stock Exchange closed up.