French consumer spending falls sharply in March

22nd April 2004, Comments 0 comments

PARIS, April 22 (AFP) - French households curtailed spending sharply in March, reflecting a cautious outlook in the face of unemployment fears, a stance that indicates further spending declines in the coming months, analysts said Thursday.

PARIS, April 22 (AFP) - French households curtailed spending sharply in March, reflecting a cautious outlook in the face of unemployment fears, a stance that indicates further spending declines in the coming months, analysts said Thursday.

Consumption of manufactured goods fell 1.4 percent in March from the previous month, according to the national statistics office Insee, compared with analyst consensus expectations of a decline of just 0.4 percent.

In the first quarter as a whole, however, household spending was up 2.0 percent from the last three months of 2003, thanks to heavy buying during the post-holiday sales in January.

Jean-Marc Lucas, economist at BNP Paribas, noted that first-quarter spending was the strongest since the beginning of 2000.

"This confirms that household spending clearly supported GDP (gross domestic product) growth in the first quarter," he said.

But other analysts said spending has been driven by sectors that have used sales and promotions to draw clients, such as car and clothing manufacturers, or for products such as imported electronics goods, where prices have fallen owing to the strong euro.

In March, spending on electronics rose 1.5 percent from February, household appliance purchaes were up 4.3 percent, and auto sales increased 2.1 percent, but spending on clothing dropped 10.1 percent.

"It can be seen that price cuts are now the exclusive driver of household demand," said Emmanuel Ferry, chief economist at Exane in Paris.

"This indicates an increased pressure on margins for retailers, and an advantage for goods imported from low-cost regions," he said.

Focussing on bargains is also the sign of a wary consumer, said Marc Touati, chief economist at Natexis Banques Populaires, who expects bad weather in April to cut consumer spending again for this month.

"More fundamentally, French spending will not be able to post a significant and durable increase as long as employment remains weak," Touati said, adding that household spending was expected to rise only 1.5 percent in 2004.


© AFP

                                              Subject: French news

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