French consumer confidence fell unexpectedly in February, dealing a blow to recovery prospects in the euro zone's second largest economy ahead of a key European Central Bank meeting on interest rates this week. National statistics office INSEE said on Tuesday its consumer confidence index, based on a survey of some 2,000 households, came in at minus 23 in February versus a confirmed minus 22 in January. The reading was below market expectations, just as pressure is mounting on the ECB to cut interest rates when it meets on Thursday. Economists polled by had forecast a reading of minus 21 for the confidence index. France and Germany have urged the ECB to cut rates, with Berlin saying the euro's strength has led to problems for exporters. But a euro zone monetary source told on Monday nothing pointed to the ECB cutting rates any time soon. The French report contrasted with a survey last week from Germany, the euro zone's largest economy ahead of France, which showed German consumers' willingness to spend rose in February -- to its highest level since January 2002.
The INSEE readout added to concerns that a recovery in France is losing momentum, after a survey published on Monday showed growth in the French manufacturing sector slowed in February as the strong euro dampened demand from foreign buyers. The report was also a jolt to the French government ahead of regional elections later this month seen as a key mid-term test for President Jacques Chirac and the centre-right administration. The consumer confidence reading, a pointer to likely trends in consumer demand and economic growth, showed a downturn in households' willingness to spend after they went bargain-hunting in January and drove consumer spending up 2.0 percent. Adding to the gloom, France's car industry body said on Monday French new car sales dropped 2.7 percent in February.///