French consumer spending dropped for the first time in three months in February as a rising unemployment and concern over the impending war in Iraq hit consumer confidence. Consumer spending fell 0.5pc in February from January, a bigger decline than had been expected, and was up 2.1pc on a year-on-year basis, according to national statistics institute INSEE.
The monthly drop in spending was the largest since November 2002 and analysts say that a increasing unemployment could further impact on spending by consumers. Insee expects the French economy to recover slowly this year, but the improved growth will not be enough to support the labour market. Finance Minister Francis Mer predicted last week that the jobless rate would rise to 9.5pc over the coming months from 9.1pc in January. The decline in spending follows recent figures showing consumer confidence plunged in February to its lowest level in nearly six years. Confidence is likely to remain weak in March; a weekend poll in Le Parisien revealed that almost two thirds of French citizens fear economic and political backlash from the US over France's stance on the war in Iraq. //www.fxcentre.com