PARIS, April 30 - French consumer morale edged up from rock-bottom levels in April as the end to the war in Iraq neared, but a rise in unemployment to its highest since August 2000 could hurt future sentiment and spending, economists said. National statistics office INSEE said on Wednesday its April consumer confidence index inched up to minus 29, in line with expectations, after slumping to minus 32 in March, in the run-up to the war -- its lowest in more than six years. However, economists expect morale to stay low after a fresh rise in the jobless rate to a gloomy 9.3 percent in March, as mass layoffs continued, and after Labour Minister Francois Fillon said the job market could stay weak all year.
"The data are unfortunately consistent in pointing to weak future consumption," UBS Warburg economist Stephane Deo said. That would herald yet more gloom for the euro zone after bleak economic data from Germany, Italy and Belgium in recent days. INSEE's poll of 2,000 households was conducted from April 1 to 17, meaning half the replies came after the war wound down around April 10. Economists polled by had forecast a confidence index of minus 28.4. The survey did not take account of an unexpected 0.6 percent month-on-month rise in the March unemployment register, which the Labour Ministry said took the jobless total to 2,505,000, based on International Labour Organisation criteria. The jobless rate, which economists expected to stay flat at February's 9.2 percent, is the highest in two and a half years. Leaked by France 2 TV late on Tuesday and confirmed by the ministry on Wednesday, the figure is well above the euro zone average of 8.7 percent, itself a three-year high. Fillon told reporters as he left a cabinet meeting that a turnaround in employment would not come before the end of the year, when the French government hopes growth will pick up.
"Unemployment is bad and will continue to get worse," said Banques Populaires Asset Management economist Philippe Waechter. "Consumer confidence seems to be more a correction from the dramatic situation in March, linked to Iraq, than a trend change. People remain concerned about their personal situation." Compounding the gloom, French business morale slid in April to its lowest in over a year, separate data from INSEE showed on Tuesday, prompting new calls for a euro zone interest rate cut. INSEE also reported the French economy shrank in the final quarter of 2002 and raised its estimate for the 2002 public deficit to above the euro zone's limit.
JOBS A KEY WORRY
Grappling with a sluggish global economy, French firms have announced tens of thousands of job cuts since the centre-right government took power in June. Unemployment was rated a top concern, ahead of world peace and pensions, in a recent poll. "We are seeing the impact on jobs of the poor growth of the last quarter of 2002," said Credit Lyonnais economist Olivier Eluere. He predicted unemployment would be high until at least the third quarter of 2003 and average 9.3 percent on the year. Unemployment may affect morale all the more now that Iraq is a lesser factor, economists say -- although Wednesday's data showed people were less worried about jobs in April than March and less pessimistic in general about living standards. Finance Minister Francis Mer said recently the jobless rate could rise to 9.5 percent in the coming months. Angry workers from state-owned tank and weapons maker Giat Industries took to the streets this month to protest at plans to close two factories with the loss of some 4,000 jobs.
"Morale is bad," said Didier Lametery, a Giat factory worker for 23 years. "If I lose my job I don't know what I'll do. It'd be impossible to get another one in this climate." Cash-strapped engineering firm Alstom also announced 3,000 job cuts this month, following massive layoffs at telecoms giants France Telecom and Alcatel, and at airline Air Lib. Economists warn that mounting unemployment fears could drag down household spending, traditionally the main growth driver in the euro zone's second-biggest economy. "The consumer confidence figure does not mark the start of a solid rebound and spending. Many domestic factors like pensions will weigh in the months ahead," said Nicolas Claquin at CCF. Robust spending is vital if France is to meet even the modest 1.3 percent growth the government is predicting for this year, after halving its growth forecast in February. France needs a quick return to vigorous growth to rein in a budget deficit set to hit 3.6 percent of gross domestic product this year, busting euro zone limits for the second year running.//