French consumer confidence faulters

28th May 2004, Comments 0 comments

PARIS, May 28 (AFP) - A renewed decline in French consumer confidence in April, combined with an unemployment rate that remains close to 10 percent, could signal an imminent decline in household spending, analysts said Friday.

PARIS, May 28 (AFP) - A renewed decline in French consumer confidence in April, combined with an unemployment rate that remains close to 10 percent, could signal an imminent decline in household spending, analysts said Friday.

Buoyant spending has been the main driver of France's economic recovery so far this year, despite only limited signs that growth is spurring business investment or hiring.

"The new decline for confidence reminds us just how fragile this support is," said Nicolas Claquin, economist at CCF in Paris.

May consumer confidence fell to minus-23 from minus-20 the previous month, while the unemployment rate for April was stable at 9.8 percent, statistics office INSEE reported Friday.

Analysts polled by AFX News, AFP's financial news service, had forecast a consensus reading of minus-21.

Within the confidence survey, the index measuring the expected outlook for unemployment surged to 60 in May from 39 the month before.

The index showing the inclination to buy consumer goods fell to minus-14 from minus-12, underscoring the likelihood of an imminent slowdown of spending, after the 1.5 percent spending increase in April from March reported by INSEE earlier this week.

"After the good surprise for April and until the summer sales in July, consumer spending risks going through a difficult period," said Marc Touati, chief economist at Natexis Banques Populaires.

But Laure Maillard, Eurozone economist at CDC Ixis, noted that unemployment fears and weak confidence have been recorded by INSEE for several months now, and yet households have continued to dip into their savings in order to spend.

"Even if this figure highlights uncertainties surrounding consumer spending, one should remember that the link between consumer confidence and consumption is often loose," Maillard said.

Analysts said one key to the consumer spending outlook will be inflation, which looks set to rise on the back of high oil prices.

INSEE reported Friday a 0.4 percent rise in its producer prices index for April, below a consensus forecast of a 0.5 percent rise, but accelerating from the levels seen in the first months of this year.

"Only a continuation of the large price cuts for certain products will allow household spending to maintain itself at a rhythm that is above the levels theoretically conceivable when measured by traditional indicators (confidence, employment, and revenues)," said Emmanuel Ferry, economist at Exane BNP Paribas.

© AFP

Subject: French news


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