French consumer spending falls sharply

21st October 2004, Comments 0 comments

PARIS, Oct 21 (AFP) - French consumer spending fell more sharply than expected in September as the retail sector was hit by concerns about the employment outlook, official data released Thursday showed.

PARIS, Oct 21 (AFP) - French consumer spending fell more sharply than expected in September as the retail sector was hit by concerns about the employment outlook, official data released Thursday showed.

The Insee statistics institute said household consumption of manufactured goods fell 0.6 percent in September from August, undershooting analysts' expectations for a rise of 0.6 percent.

Over 12 months, spending increased 1.8 percent, missing analyst forecasts for a rise of 2.9 percent.

Behind the headline figures, a three percent rise in spending on cars in the month was eclipsed by a 1.6 percent decline in retail spending, as measures taken by the French government to boost spending failed to lure consumers into the shops.

Natexis Banques Populaires economist Carol Hainaut said although sharper than expected, the fall should in fact come as no surprise as it amounted to a correction in the wake of dynamic spending in recent months.

"After the exceptional strength of the summer period, the fall in household spending seen in September, disappointing though it is, seems above all to be a return to the norm," she said.

Hainaut said the drop in spending would "probably be corrected next month" though the trend in the months to come was far from optimistic.

"The outlook for employment in the industry is showing no signs of improvement," she warned, adding that "unemployment is not likely to decline in the near future."

"For the time being, employment is still stagnant and inflation is above two percent," BNP Paribas economist Jean-Marc Lucas added.

Hainault said that while consumer spending would remain the main driver behind French growth, it was unlikely to exceed 2.4 percent this year and would slow to 2.0 percent in 2005, Hainaut said.

"In the quarters to come, traditional supports to private consumption should remain rather weak," said CDC IXIS economist Laure Maillard, adding that consumption is "not expected to accelerate significantly".

© AFP

Subject: French News

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