French consumer spending fell at the fastest pace in nearly 10 years in September as households spent less on cars, textiles and leather goods, but economists said it was a natural correction after a summer spending spree.
National statistics office INSEE said on Tuesday consumer spending on manufactured goods, the driving force for Europe's second-biggest economy, fell 2.7 percent from the previous month, the biggest fall since November 1996, but rose 2.9 percent year-on-year.
"It is clearly too early to say whether spending is really dropping - I think we are simply seeing the follow up to a very strong month of August," said Nicolas Bouzou, economist at Asteres. August's month-on-month rise was revised down to 3.0 percent from a previously reported 3.3 percent, but remained the highest in seven years.
The consensus forecast in a Reuters survey of 34 economists was for spending to drop 1.4 percent month-on-month in September, with forecasts ranging from an increase of 0.1 percent to a drop of 3.0 percent.
Economists said August's spending spree was boosted by state payments to parents to buy goods for children returning to school which was made at the end of August rather than in early September as in previous years. Spending on textile and leather goods fell 9.5 percent from the previous month after gaining 4.7 percent in August.
"The fall in textiles seems justified because we had a level that seemed totally unjustified in the month of August so it's a correction," said Societe Generale economist Olivier Gasnier. "On top of that the weather was not favourable in September because it was very good weather so people delayed their winter clothes purchases combined with the fact that the back to school benefit was paid at the end of August," Gasnier added.
Italian shoppers's were also reluctant to spend in October. The belt tightening budget draft from Prime Minister Romano Prodi's government led consumers to take a dimmer view of the economy's prospects and their morale fell from September's four year high.
Over the third quarter as a whole consumer spending growth slowed slightly to 1.2 percent from 1.4 percent in the previous quarter, which could impact third-quarter GDP figures.
Finance Minister Thierry Breton has painted an upbeat picture of how he sees the French economy faring in the third and four quarters and Prime Minister Dominique de Villepin said last week 2006 growth should reach 2.3 percent.
Car purchases fell 0.8 percent month-on-month in September after a 3.1 percent jump the previous month. That paled in comparison, however, with July's fall of 6.9 percent.
National car makers' association CCFA said earlier this month that new car registrations in France fell 13.3 percent in September year-on-year and on a same number of working days basis, showing a volatile market. Spending on household equipment slid 0.5 percent month-on-month after a 5.3 percent jump in August.