Paris, Feb. 4 (Bloomberg) -- French consumer confidence fell to a five-year low in January as unemployment climbed, suggesting household spending in Europe's third-largest economy may lose steam. An index based on a government survey of 2,000 households fell to minus 22 from minus 17 in December. Economists surveyed by Bloomberg News had expected a reading of minus 18. ``I don't expect to find a job right away,'' said Anna Cerda, a 26-year-old student, leaving a Gap Inc. clothing store in central Paris. ``I pay attention to what I spend and have been waiting for the discount sales.'' Optimism among French consumers is dwindling as companies including Pechiney SA, the world's fourth-biggest producer of aluminum, and Nexans SA, the world's largest cable maker, cut payrolls. The number of French jobseekers rose to a 28-month high of 2.45 million in December. Consumer spending accounts for more than half of Europe's third-largest economy, and spared it from recession last year when growth in gross domestic product probably declined to 1 percent, the weakest since France's 1993 recession. French car and light-truck sales fell 9.3 percent in January, as demand for older car models such as Renault SA's Clio and Laguna declined.
Job Losses
Sales at Galeries Lafayette SA, France's largest department store operator were ``disappointing'' at the end of 2002, particularly over the last two weeks of the year, co-Chairman Philippe Lemoine said last month. Rising unemployment is denting consumer spending on manufactured goods, which rose just 0.2 percent from October through December after gaining 0.7 percent in the previous three months. France's 9.1 percent unemployment rate is unlikely to drop for at least four months, Labor Minister Francois Fillon said in an interview with Le Journal du Dimanche newspaper. Pechiney said last week it's cutting 600 jobs and closing plants this year. Nexans said it's shedding 500 jobs this year after paring 1,000 positions in 2002. Metaleurop SA, a producer of lead and zinc used in car batteries, electronics and optical fibers, is closing a plant in northern France which employs 830 workers. South Korea's Daewoo Electronics Co. last month shut a factory making television cathode-ray tubes in eastern France with about 600 staff.
Prospect of War
A possible U.S.-led war against Iraq is also hurting consumer and business confidence across Europe, analysts say. European consumer confidence fell in January to near a six-year low, and business optimism declined for the first time in five months, adding to evidence of a contracting economy. ``The potential fallout of a war in Iraq is increasing pessimism,'' said Anne Beaudu, an economist with Credit Agricole SA. ``Europe's industry is destroying jobs, and prospects are clouding everywhere.'' Rising tension in the Middle East boosted oil prices, pushing the annual rate of French inflation to a nine-month high of 2.2 percent, eroding consumers' purchasing power, analysts said. Concern the French government will increase the contribution period that entitles workers to a full pension -- currently 37 1/2 years in the public sector, and 40 years in the private sector -- is also weighing on shoppers' sentiment. About 300,000 workers demonstrated nationwide on Sunday against government plans to shore up the national pension system by the middle of the year. France's pension system is expected to post shortfalls from the middle of the decade as the number of retirees swells. //www.quote.bloomberg.com