Household spending in France, Europe's third-largest economy, unexpectedly fell in September, hurt by unemployment and rising oil prices. French consumer spending declined 0.6 percent from 0.5 percent in August, Paris-based statistics office Insee said. Economists expected a 0.8 percent increase, according to the median of 27 forecasts collected by Bloomberg. Year-on-year growth slowed to 1.8 percent from a revised 5.6 percent. The decline ``means French growth will struggle to accelerate,'' Carol Hainaut, an economist at Natexis Banques Populaires in Paris. ``The outlook for unemployment is not great, there was no reason for consumption to strongly rise.''
Discounts offered by retailers such as Carrefour SA, prodded by Finance Minister Nicolas Sarkozy to cut prices last month, failed to lure shoppers concerned over a 9.9 percent unemployment rate and record oil prices. Crude oil prices have climbed almost two thirds this year and reached a record of $55.33 a barrel in New York on Oct. 18. Consumer demand, which accounts for more than half of gross domestic product, kept France's economy growing faster than the 12-nation euro region for the past four quarters. Sarkozy's efforts to boost consumption underscore concerns that growth may slow in the euro region. At least eight reports this month signaled the $9 trillion euro-region economy is slowing as oil prices and joblessness climb.
Bonds Gain
European Central Bank President Jean-Claude Trichet said in an Oct. 15 interview that rising oil costs have increased the risks for Europe's economy and backed away from a forecast that growth will accelerate this year. The ECB has kept its benchmark interest rate at 2 percent since June 2003, the lowest for the dozen nations sharing the euro in about six decades. European bonds gained after the report. France's 4 percent bond maturing in October 2014 rose 0.06, or 60 cents per 1,000 euro ($1,257) face amount, to 100.74, at 8:48 a.m. in Paris, according to HSBC Securities. The yield fell 1 basis point, or 0.01 percentage point, to 3.90 percent.
Clothing, Leather Sales
Insee's report showed purchases of clothing and leather goods dropped 2.7 percent and home furnishings shed 1.7 percent. Car sales rose 3 percent. Kesa Electricals Plc, the owner of France's Darty consumer- electronic chain, said on Sept. 29 that sales in August and early September ``were not as strong'' as last year as it sold fewer fans and refrigerators after last year's heat wave. The September decline came even after Sarkozy persuaded retailers such as Carrefour and manufacturers including Danone SA to cut prices by an average 2 percent as of Sept. 1. Business ``has deteriorated sharply'' in France, said Carrefour Chairman Daniel Bernard Oct. 13 after the company, Europe's largest retailer, said it would miss its profit growth target. Prices of branded consumer goods such as L'Oreal cosmetics fell by an average of 1.57 percent in France last month as supermarket chains and manufacturers implemented the discounts, data-company Information Resources Inc. said on Oct. 19. The measures may have ``a slight effect in the short term, but not in the long run,'' said Christoph Weil, an economist at Commerzbank AG in Frankfurt. Consumer spending ``is slowing down, the main reason is higher oil prices.''
The price of diesel paid by drivers has risen 25 percent since the beginning of the year, statistics from the finance ministry show. Growth in Germany, the biggest export market for France and Italy, slowed in the third quarter from the second quarter's 0.5 percent rate, the Bundesbank said Oct. 18. Weil said that rising crude oil prices prompted him last week to lower his forecast for French 2005 growth to 2 percent from 2.5 percent. He expects France's gross domestic product to expand 2.5 percent this year. ///www.bloomberg.com