French business confidence fell again in February. The overall business climate slipped below its long-term average, and services were among the weakest sectors.
This weaker climate points to softer economic activity in the near term. It suggests GDP growth in the first quarter of 2026 may struggle to beat the 0.2% pace seen in the fourth quarter of 2025, and it could come in lower.
Growth Outlook For 2026 And 2027
For full-year 2026, GDP growth is still expected to be around 1%. Rising real wages could support consumer spending and investment, as long as confidence holds up.
For 2027, growth is forecast at 1.1%. Political and fiscal risks remain high.
The latest drop in French business confidence suggests the slowdown from late 2025 is continuing into the new year. A weaker first-quarter outlook also means French equities could face near-term pressure. One approach is to consider strategies that can benefit from flat or falling prices, such as buying puts on the CAC 40 index.
This view is supported by recent data showing the HCOB Eurozone Services PMI is still in contraction at 48.9, highlighting ongoing weakness in services. With the CAC 40 already down 1.5% this month, selling call spreads may be a sensible way to take advantage of limited upside. Any rallies may be capped until the growth picture becomes clearer.
Euro And Risk Positioning
France’s weakness could also weigh on the euro, since France is a key part of the bloc’s economy. EUR/USD has been sensitive to growth gaps between the Eurozone and the United States. Short-term bearish trades on the currency may be worth considering, especially if upcoming inflation data does not give the European Central Bank a reason to sound more hawkish.
Still, any bearish view should be tactical and short-term, because a modest rebound to 1% growth for the full year is still the base case. This would mirror what happened in 2023, when a weak start was later offset by improving conditions. That suggests option positions may be better structured to expire before the second half of the year.
The gap between a weak first quarter and a more hopeful rest-of-year outlook increases uncertainty, which often leads to higher volatility. Buying calls on a volatility index such as the VSTOXX could help hedge against a sudden market drop. This would protect portfolios if the slowdown turns out to be worse than expected.
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