The IEDOM August 2026 economic letter paints a contrasted picture for Réunion: inflation slows sharply to 0.7% year-on-year in July, after peaking at 1.5% in June. But business failures across France's overseas territories reached 3,040 over the past twelve months. Structural fragility remains.
Inflation Finally Retreating
After several quarters under pressure, prices in Réunion are returning to a gentler path. The consumer price index rose only 0.7% year-on-year in July 2026, down from 1.5% in June. This retreat is mainly attributable to easing on petroleum product prices — after the 22.2% surge recorded in June — and to moderation in food prices.
For Réunion households whose budgets are heavily strained by fixed costs, this relief is welcome. It also reduces pressure on retailers' margins, which had been forced to pass on cost increases during the first half of the year.
The Business Failure Barometer in the Red
But price stabilisation does not mask all the tensions. Over the period July 2025 to June 2026, 3,040 business failures — court-ordered liquidations and restructurings — were recorded across France's overseas territories (DROM). This figure, drawn from IEDOM statistics, illustrates the persistent difficulties facing the entrepreneurial fabric in the overseas territories, in a context of higher interest rates and pressured domestic demand.
Household over-indebtedness also remains a concern: 216 new over-indebtedness files were filed in Réunion in July 2026, a 22% increase year-on-year.
A Business Climate to Watch
The business climate indicator (ICA) stood at 100.1 points in Q2 2026, down 3.5 points from the previous quarter, returning to its long-term average. Unemployment rebounded 1.6% over the quarter, partly erasing the gains of the previous three quarters. Only air tourism is holding: air traffic grew 1.3% over the quarter, signalling resilient international demand.
Companies are reporting declining customer footfall. Cash deposits fell 2.5% year-on-year — a retreating household sentiment indicator.
Why It Matters
Réunion is navigating between easing inflationary pressures — welcome but insufficient on their own — and still-fragile fundamentals: unemployment, over-indebtedness, business failures. The territory illustrates the vulnerability of island economies to exogenous shocks — Middle East geopolitical crises, fuel price surges — that they cannot control. Policies to support micro-enterprises and SMEs, and the administrative simplification demanded by the private sector, remain priorities for consolidating the recovery.
Source: IEDOM, Economic Letter for Réunion, August 2026.