French household spending weak

PARIS, Jan 22 (AFP) – A weaker than expected rise in December household spending following a sharp decline the previous month has underscored consumer doubt about chances for a significant upturn in the French economy, analysts said Thursday.

The national statistics office INSEE reported that spending rose just 0.2 percent in December, on the heels of a 2.6 percent drop in November, and well below a consensus forecast of a 0.8 percent rise.

“While our political and monetary leaders make impassioned announcements about the imminent return to strong growth in France, gloominess remains on the street,” said Marc Touati, economist at Natexis Banques Populaires.

Excluding a technical rebound in automobile spending, up 4.5 percent in December against a 9.4 percent slide the previous month, household spending fell 0.7 percent.

“Households are having a difficult time finding any confidence. Inflation remains above two percent, and any recovery in the labour market will be slow,” said Nicolas Claquin, economist at CCF in Paris.

Analysts said the data also confirmed fears of disappointing spending over the holiday season, indicating that consumers will wait for tangible signs of a recovery, such as a decline in the unemployment rate, before opening their wallets further.

“It seems that there was a wait-and-see effect as people waited for the post-holiday sales, and this would allow one to imagine a better performance for January,” Claquin at CCF said.

“But this attitude is the reflection of a significant sensitivity among consumers to prices, and they are now adapting their purchases, maybe even more so than in the past, in response to promotions,” he said.

“There was no Christmas miracle,” agreed Emmanuel Ferry, economist at Exane in Paris.

“We maintain our forecast that a genuine recovery of household spending is not realistic before 2005, or even 2006, due to the absence of any traditional catalysts,” such as job growth, tax cuts, or a decline of inflation rates, Ferry said.

© AFP

                                Subject: France news