Double dose of bad news for French economy

30th November 2006, Comments 0 comments

PARIS, Nov 30, 2006 (AFP) - The French government, facing a presidential election in April, got a double dose of bad news Thursday as official figures showed that consumer confidence contracted in November while a decline in joblessness ground to a halt in the previous month.

PARIS, Nov 30, 2006 (AFP) - The French government, facing a presidential election in April, got a double dose of bad news Thursday as official figures showed that consumer confidence contracted in November while a decline in joblessness ground to a halt in the previous month.

The results reflected France's stagnant economic momentum in the third quarter.

Prime Minister Dominique de Villepin in the past few days had sought to prepare the public and political ground by warning that zero momentum from July to September would have an impact on the labor market.

The employment ministry said the unemployment rate in October, 8.8 percent of the workforce, showed no change from September, interrupting a downward trend from August, when the jobless rate came to nine percent.

The national statistics institute INSEE meanwhile reported that household consumer confidence declined in France for the second month running in November.

INSEE said its index measuring confidence fell to minus-25 from minus-21 in October, according to seasonally corrected figures.

The index in October had fallen to minus-21 from minus-20 the previous month. All the leading components of the index were in decline in November, notably household attitudes on standards of living and future prospects.

"It's a serious warning," said Nicolas Bouzou of the economic research group Asteres.

"It is striking that the unemployment rate interrupts its decline at a time when economic growth is zero and when all economic indicators are pointing downward."

He said French companies managed to create fewer than 15,000 jobs in the third quarter and that economic layoffs were rising sharply.

France's stubbornly high jobless rate is frequently attributed by economists to an inflexible labor market, which saddles employers with high social charges and constraints to laying off staff and makes them reluctant to take on workers.

"In the last 20 years France on several occasions has found itself in the same situation," noted Alexander Law of the market research firm Xerfi.

"The unemployment rate can fall sharply for exceptional reasons but cannot go below the 8.5 percent threshold. At the moment, France is approaching its structural rate of unemployment but nothing suggests that it can break through this barrier."

Added Luca Silipo of the bank Ixis CIB: "For there to be a real improvement in the labor market, we need profound reform and a clear industrial strategy to stop the current loss of competitiveness" of French enterprises.

Bouzou of Asteres meanwhile warned that the decline in household confidence posed serious risks to the economy.

"Households see a degradation in their present financial situation" that could discourage consumption — a key driver of the economy — in the months ahead, he said.

French Finance Minister Thierry Breton insists that overall growth will pick up in the fourth quarter to somewhere between 0.6 and 0.8 percent, meaning that the government's target range for the year of 2.0 to 2.5 percent will be reached.

The Organisation for Economic Cooperation and Development earlier this week forecast growth in France of 2.1 percent in 2006.

But analyst have said that figure would place France at or near the bottom of the eurozone growth table.

Copyright AFP

Subject: French news

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