Finance news

French consumer spending rebounded more than expected in January, as waning confidence prompted more shoppers to seek discounts in the country’s annual sales period.

Spending on manufactured goods in January gained 1.8 percent, more than the 0.3 percent increase expected by 19 economists surveyed by Bloomberg. The gauge of consumer sentiment this month fell to minus 43 from a revised minus 42 in January. Economists expected a reading of minus 42, according to the median of 17 economists surveyed by Bloomberg News.

The confidence index “remains at very low levels with barely any room for improvement and their spending is increasingly under threat with even the middle class starting to feel the chill,” Maryse Pogodzinski, an economist at JPMorgan Chase & Co. in Paris, said in an interview.

Falling prices for commodities and manufactured good have not been enough to boost consumer confidence after the economy entered into recession in the fourth quarter. The euro region’s second-largest market is heading into its biggest contraction since the end of World War II. President Nicolas Sarkozy said Feb. 17 he considers the recent French economic data “worrying” and with about 45,000 people loosing their jobs each month, the French are turning increasingly pessimistic.

Clothing Sales

Consumer spending accounts for about 15 percent of the economy. The French Fashion Institute estimates sales of textile and footwear rose by as much as 5 percent from a year earlier in the first two weeks of the annual sales period started on Jan. 7.

Purchases of clothes and leather goods increased 4.7 percent from December, and house equipment goods added 3 percent.

A gauge of people’s outlook about their personal financial situation fell to minus 20 from a revised minus 19 guaranteed unsecured personal loans. The gauge also showed they planned to squeeze their purchases in the near future.

Sarkozy announced on Feb.18 the state will spend an extra 3.3 billion euros on consumers and low-income household to help them face the economic crisis. The measures come on top of the 26 billion-euro stimulus plan he announced in December to spur long- term growth by focusing on infrastructure spending.

The government will also make one-off payments of 500 euros before the summer to jobseekers who haven’t worked enough to be eligible for unemployment benefits. It will extend payouts to laid-off workers as many companies shut factories or halt production to cope with waning demand.

Oil Prices

“Slower inflation and the oil price slump have already produced their effect on consumer confidence and spending,” Pogodzinski said. “With the economy destroying nearly 50,000 jobs a month, the first quarter is already looking bad. Spending held relatively steady.”

After car makers Renault SA and PSA Peugeot Citroen announced job cuts, PPR SA, the French retail group, said it plans to reduce costs by 85 million euros and trim jobs at its Conforama home-furnishing stores and at the Fnac chain of book, electronics and video-game shops as shrinking economies hurt sales.

French jobseekers exceeded 2.1 million in December, the most in more than two years. Gross domestic product fell 1.2 percent in the fourth quarter, the biggest decline in three decades and the European Commission expects the French economy will shrink 1.8 percent this year.

Source

Filed under: finance by Finance Boss