French consumer expenditure, linchpin of an economy that depends far more on domestic demand than its export-propelled neighbour Germany, could falter further in the coming weeks, according to a two reports published on Thursday. With morale at its lowest in three years and unemployment claims at their highest in 12 years, economic prospects are dim as President Nicolas Sarkozy's conservative government prepares to raise tax in a policy U-turn just over three months from an election.
His own prospects will hardly benefit either from relentless news headlines of the threat to France's debt market rating and job losses at companies such as ferry operator SeaFrance and a closure threat at a Petroplus oil refinery. A monthly report from statistics office INSEE said consumer morale held steady in December but at its weakest since December 2008 when the country was heading into recession along with much of the industrialised world.
"One interpretation is that French consumers have not recovered from the subprime crisis, which triggered the worst recession since the Second World War and has now turned into a sovereign debt crisis," said Marion Laboure, economist at Barclays Capital Research.
A survey by polling outfit TNS Sofres showed that 67 percent of respondents, or roughly two in three people, think they will have to cut back on spending in the coming months, primarily on holidays and entertainment and then on clothes.
The two reports followed another one on Wednesday in which the statistics office reported a drop in household expenditure in November, the last month for which a readout of expenditure by French households is available. Seasonal discount selling gets going in earnest next week, which may bolster spending to an extent, especially if people are keen to concentrate their annual purchases of clothes and other items in cut-price periods, but the outlook thereafter remains worrying, economists say.
The statistics office's December survey of consumer morale showed people rating of their personal financial situation had deteriorated, both when they rated it for the recent past and for the period ahead. The overall sentiment index held steady in December at the previous month's level of 80, the lowest since December 2008.
The TNS Sofres poll, based on a January 3 telephone survey of 963 people, said 67 percent of respondents expected to have to tighten their belts in coming months. Of them 20 percent said they would have to cut back hard. "We see only limited scope for consumer confidence to improve markedly at the beginning of the year," said economist Laboure.
The statistics office said in mid-December that France had entered what it expected to be a short and shallow recession as the country heads towards a double-batch of presidential and parliamentary elections in the second quarter of 2012. French economic growth was a lacklustre 0.3 percent in the third quarter of 2011, after a 0.1 percent dip in the previous quarter.
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