French business confidence improves in July despite Middle East conflict, heatwaves

PARIS, July 23 (Reuters) - French business confidence rose to a four-month high in July despite a new flare-up in the U.S.-Israeli war on Iran and record heatwaves at home, a monthly survey showed on Thursday.

The INSEE statistics agency said its business survey improved to 97 points in July, still short of the long-term average of 100, but reaching its highest point since March, just after the Iran war kicked off with U.S. and Israeli strikes.

The improvement suggested business sentiment remained resilient despite the renewed tensions in the Middle East and the summer heatwaves in France, with confidence rising across manufacturing, services and retail trade.

Confidence was highest in manufacturing, where the index ticked up to 101, up from 100 in June, in line with expectations, as businesses reported stronger output and an improvement in order books despite the conflict-related risks to oil prices and supply chains.

However, the share of firms reporting supply-side constraints rose to 22%, reaching its highest point since late 2023, driven in part by increased difficulties securing inputs, the survey showed.

Confidence in services, France's largest sector, rose two points to 98, even though business leaders continued to report above-normal economic uncertainty.

Hotels and restaurants saw a particularly sharp rebound in demand expectations and activity prospects in July, which bodes well for the summer tourism season, despite extreme heat. Many hotels have reported an influx of domestic customers seeking a night's sleep with air conditioning during the recent heatwaves.

Retail-oriented businesses posted the strongest gain among major sectors, with their confidence indicator jumping eight points to 99 on stronger order intentions and a better assessment of the overall outlook.

In construction, confidence was unchanged at 95, with firms reporting that they were slightly less optimistic about future activity.

(Reporting by Leigh Thomas; Editing by Thomas Derpinghaus)