Not to use them except in speech? That isn't a rule I've heard. I think it depends on the formality of what you're writing. For example, to go back to the idea of limited third-person narration or even first-person, where the narration is from the POV of a character, you'd use contractions even in narration if your narrator-character is the type of person who would use them in speech, whereas if your narrator-character is a person who speaks very formally and doesn't use contractions, then you wouldn't use them in narration given from that character's POV.
If your narrator isn't a character at all, as in omniscient third-person (which I think is the POV you're referring to, isn't it, CF?), then the choice of whether to use contractions in narration depends on the overall tone you want for the story. If it's very formal, then no, you probably don't want to use them. However, if the story has a more informal feel, it makes sense to use them.
I'm fairly sure that I've read a few novels written in the past 30 - 40 years in omniscient 3rd that did use contractions in narrative. Didn't Douglas Adams use them in the Hitchhiker's Guide novels? (Drat, now I'll have to go and look!)
Heheh. Frank is my narrator in most of ATWLB, which is written in 3rd-person limited. And if he's irritated, agitated, worried or angry, he is given to the use of rather 'colorful' language as well. Flora, who uses him as narrator in the first two books of her anthology, gave him that tendency, and I find it both useful and... well, very realistic for a character like him.



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I don't use them in every character's speech. Teyla, for example, does not use contractions if I remember right. If the character would use contractions, I use them when I'm in their dialogue or in their head; if not, I do not. 