French consumer spending shows surprise fall

French consumer spending fell in August, dashing expectations of a rise and raising questions over the robustness of a nascent economic recovery as shoppers cut back on new clothes, shoes and cars. Consumer spending fell 1.0 percent month-on-month in August, national statistics office INSEE said on Wednesday - well below a consensus forecast for a 0.6 percent rise after a fall of 1.2 percent in July in the key economic driver.
France, along with Germany, surprised financial markets with a return to economic growth in the second quarter of this year, led by a rise in consumer spending, but economists fear rising unemployment could threaten the fragile recovery. "It illustrates that difficult times are here for consumption," said Olivier Gasnier, an economist with Societe Generale.
"We are entering a period which is much more difficult for the labour market: prices are beginning to rise and the labour market is not on a good track." Others pointed out that it is easier to reduce spending during the summer, and that consumption could rebound in September, after the holidays.
Sales of textiles and leather goods in France were down 3.8 percent, while spending in the auto sector fell 1.2 percent as the impact of car incentive schemes that boosted consumption earlier in the year wound down. However, export orders climbed at their steepest rate since February 2007, separate data on the September flash purchasing managers' indexes showed on Wednesday.
"The French economy only really has one driver at the moment, household consumption. So this is not a good sign for the future," saidJean-Christophe Caffet, economist at Natixis. "But given the stimulus plans implemented globally, we should have a positive effect from French exports."
The Markit/CDAF flash composite purchasing managers' index, which combines data from both the manufacturing and services sectors, rose to 53.9 in September from 51.3 in August - showing French private sector activity grew at its fastest pace in a year and a half in September. An improvement in global orders also boosted business morale. French firms' business confidence rose to 85 in September, above a consensus forecast of 81, from an upwardly revised 79 in July, separate data from INSEE showed.