Consumer confidence soars after election

31st May 2007, Comments 0 comments

PARIS, May 31, 2007 (AFP) - French consumer confidence soared to a five-year high in May on optimism about jobs and incomes, official figures showed Thursday, a surge analysts attributed to the election of reformist President Nicolas Sarkozy.

PARIS, May 31, 2007 (AFP) - French consumer confidence soared to a five-year high in May on optimism about jobs and incomes, official figures showed Thursday, a surge analysts attributed to the election of reformist President Nicolas Sarkozy.

"There's clearly been an a 'Sarkozy effect' on household confidence," said Alexander Law of the research group Xerfi, after the statistics institute INSEE reported that its household confidence index rose six points from April to minus 14, its best reading since 2002.

Nearly all components of the index registered gains, in particular those measuring expectations for an improvement in the quality of life, personal income growth and employment prospects.

The French jobless rate, traditionally one of the highest in the European Union, has been edging downward over the past 12 months. In April it fell 0.1 points to 8.2 percent of the working population, the employment ministry said Wednesday.

"Beyond the traditional state of grace that follows every presidential election, it should be noted that in the current situation the French voted in great numbers and that Nicolas Sarkozy clearly won," commented Nicolas Bouzou of the economic analysis group Asteres.

"He has put together a broadbased government that appears to be compatible with household attitudes."

Sarkozy took office on May 16 vowing to sweep away structural constraints in the French economy that he says have condemned France to high unemployment, tepid growth and social discontent.

He has promised a "a clean break" -- even a "rupture" -- with past practice through tax cuts and no-nonsense work incentives.

Analysts said some of the good feeling evident in the public reflected a planned initative by Sarkozy to exempt interest paid on principal residence mortgage loans from taxation.

"That measure should temporarily shore up the real estate market and boost spending on home building equipment," said Mathieu Kaiser of the bank BNP Paribas.

Alexander Law at Xerfi nonetheless warned that for Sarkozy and his constituents "the hardest job is yet to come," particularly in the area of employment.

"The most important reforms have yet to be carried out: increasing labor market flexibility, easing employment costs, ... ensuring that there is a balance between supply and demand in the labor pool, avoiding conflicts when job contracts are cancelled."

For analyst Bouzou of the Asteres think tank, "two questions remain."

"Is the latest jump in confidence likely to have an economic impact and, secondly, is a sharp negative turnaround possible in the short term?"

Bouzou, answering the first question, recalled that the election of Sarkozy's predecessor, Jacques Chirac, in May 1995 was followed by a sharp rise in confidence that led to a 6.8 percent gain in consumer spending in June of that year.

He said the sustainability of the May confidence level would depend on upcoming government actions.

"The real test will come in the autumn," he said.

"It's then that the government will prepare its 2008 budget, under the close scrutiny of our partners and Brussels (the headquarters of the European Union). It's then that we will see if Sarkozy has opted for fiscal measures favorable to householders or for budgetary conservatism."


Copyright AFP

Subject: French news, Politics

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