French consumers spent more than expected in November but Italians' optimism about the outlook for their economy faded in December, creating a mixed overall picture for the eurozone. The 1.5-percent rise in French spending, reported by state statistics office INSEE on Tuesday, topped the highest forecast in a Reuters poll for a 0.8-percent rise, pointing to a year-end spurt in the eurozone's second biggest economy.
The poll's mid-range forecast was for a 0.2-percent fall.
"The fourth quarter should look good," Nicolas Claquin, economist at CCF bank, said of the French economy.
The rise added to upbeat news last week from Germany, Europe's biggest economy, where business morale rose to its highest level in eight months in December.
But the fall in research institute ISAE's Italian consumer confidence index to 103.5 from 103.9 took the gloss off the outlook for the euro zone, showing that optimism about Italy's short-term economic outlook faded in December.
"Optimism about the outlook for the job market and the possibility of savings in the future also fell," ISAE said in a statement.
In another negative signal for the eurozone's economic outlook, the Ifo research institute on Tuesday trimmed its German 2005 growth forecast to 1.2 percent from 1.5 percent.
Economists also said that despite the positive INSEE report, France's unemployment rate of 9.9 percent - much higher than the eurozone average - remained a hurdle to achieving a sustained rise in household spending.
"We should be cautious with the medium-term outlook," said Claquin. "There are obstacles to consumption like unemployment and weakening purchasing power."
"The rise doesn't mean that the economy will recover in 2005," added Emmanuel Ferry, economist at investment house Exane.
Last week, INSEE cut its growth estimate for this year to 2.1 percent from 2.4 percent. The Bank of France has also scaled back its 2004 growth estimate to 2.2 percent.
But Finance Minister Herve Gaymard said on Monday French growth would be close to the government's 2.5 percent target this year and next.
CHRISTMAS CHEER: The rise in French household spending - the biggest increase since a 3.1 percent rise in June - was partly due to steps taken by former Finance Minister Nicolas Sarkozy to encourage consumer spending, economists said.
"It's also linked to the speculative bubble in the real estate market," said Ferry. "And sales of electronic goods have been boosted by the Christmas shopping spree."
Some retailers have reported solid pre-Christmas sales.
The Union de Commerce de Centre-Ville (UCV), which represents shops including department store Le Bon Marche, furnishing shop Habitat and music chain Virgin Megastore in France, said sales in the first 15 days of December were good.