Christmas cheer fails to lift French spirits in Dec
Christmas festivities failed to lift the mood of gloomy French consumers in December as data on Tuesday showed confidence levels slumped to their lowest since August in a bleak signal for the economy in the months ahead.
January 04, 2011 / 18:54 IST
Christmas festivities failed to lift the mood of gloomy French consumers in December as data on Tuesday showed confidence levels slumped to their lowest since August in a bleak signal for the economy in the months ahead.
National statistics office INSEE said its monthly index of consumer confidence in the euro zone's No.2 economy fell to -36 from a downwardly revised -33 in November, falling well short of a Reuters consensus forecast for -31.November's index had previously been given as -32.Confidence levels for December were only slightly higher than the -37 reached in August last year, reflecting renewed worries among households about the impact of high unemployment and deficit reduction measures on their personal finances."These figures reflect a real crisis of confidence which will have major economic consequences," said Alexander Law, economist at Paris-based consultancy Xerfi.Consumer confidence in France, where domestic spending is a key engine of growth, has been floundering at historic lows since late 2007 as the world became mired in financial crisis."We now know that French household consumption will struggle in 2011, and it accounts for 60% of French GDP," Law said.In December, the indicator for future living standards dropped to -48 from -44 previously, and fewer households felt now was the right time to splash out on major purchases.Poll shows french are gloomiest in worldFigures released before Christmas showed French unemployment rose again in November after falling in October, dashing hopes that the job market may be starting to pick up again after the swathes of job cuts that followed the financial crisis.Consumers are also bracing for the impact of fiscal tightening measures aimed at cutting France's budget deficit to 6.0% this year from an estimated 7.7% in 2010. The government wants to reduce it to 3.0% by 2013.To add to the gloomy picture, prices are edging up, cutting into consumer purchasing power.Crude oil prices have risen close to a two-year high recently, heralding higher fuel bills for households in the months ahead, while insurance premiums are also set to rise following an increase in natural disasters."If you add in the strikes at the start of the fourth quarter and the bad weather, it's a perfect cocktail for a drop in consumer confidence," said Law, referring to transport and fuel refinery strikes in protest at a pension reform.Tuesday's confidence data tallied with a recent BVA-Gallup survey showing that the French are the most pessimistic nation in the world over their 2011 economic prospects, even outdoing war-torn nations such as Iraq and Afghanistan.The poll found 61 percent of respondents expect to experience economic hardship in 2011, far exceeding a global average of 28%. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
