The Economic Downturn In Europe...
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French July Consumer Confidence Drops on Job Losses
By Katrin Bennhold
08/02 05:38
<<Paris, Aug. 2 (Bloomberg) -- French consumers were more pessimistic than at any time in the past two years in July as flagging world growth led companies such as Alcatel SA and Rhodia SA to eliminate jobs, a government report showed.
``It does make you feel a bit queasy reading about all those layoffs in the papers,'' said Marie-France Boutros, a 60- year-old Paris housekeeper. ``I bought nothing at the summer sales this year.''
The consumer confidence index declined for the sixth month running, falling to minus 9 from minus 8 in June, state statistics office Insee said. Economists expected no change. Concern about unemployment reached its highest level in almost four years, the survey of about 2,000 households showed.
French companies have announced more than 30,000 job cuts in the last two months and the unemployment rate rose in June for the first time in almost three years. As dwindling job security threatens to dampen consumer spending, pressure is rising on the European Central Bank to pare borrowing costs.
``With fewer jobs out there people are more careful with their money,'' said Francois Feuillet, chief executive of Trigano SA, a maker of camping equipment. ``Business is more difficult these days.''
Rate Decision Today
ECB policy makers meet today for the last time before a four-week break and will announce their rate decision at 1:45 p.m. Frankfurt time. While two-thirds of 31 analysts polled by Bloomberg News don't expect the central bank to reduce rates until its next meeting on Aug. 30, many say they should.
``A rate cut would do demand a lot of good,'' said Maryse Pogodzinski, an economist at J.P. Morgan Chase & Co. in Paris. ``People have had to deal with plenty of bad news lately.''
French manufacturers left more of their factories idle in the second quarter to adjust to falling overseas orders and weaker sales at home. The factory use rate was the lowest since the third quarter of 1999, a report showed today.
Alcatel, Europe's No. 4 phone-equipment maker, said last week it will shed 20,000 jobs this year as demand for its products slows. Rhodia, France's largest specialty chemicals maker, said it will announce an undisclosed number of job losses this year. Moulinex SA, Pechiney SA, Infogrames SA and Royal Philips Electronics NV also plan to axe jobs in France.
France's benchmark CAC 40 stock index has shed almost a tenth of its value in the past 10 weeks alone. It rose today by 52.08 points, or 1 percent, to a four-week high of 5164.56.
Rising Unemployment
French unemployment rose to 8.8 percent in June, the first increase in almost three years. Since mid-1997, Europe's third- largest economy has relied on a steady decline in the jobless rate to keep consumer spending and economic growth on course. The consumer confidence reading peaked in January 2001 at 6.
A decline in consumer confidence doesn't bode well for spending, which makes up more than half France's gross domestic product. The economy is already suffering from falling exports and investment. French growth will probably slow to 2.3 percent this year from last year's 3.3 percent, Insee estimates.
Today's report shows the index measuring job expectations surged to 40 from 17 in June, indicating more people expect unemployment to rise. That was the highest since November 1997.
While consumer spending was boosted by seasonal sales in June, it declined in April and May. French executives were more pessimistic last month than at any time in more than two years.
Calls Growing Louder
France is no exception. Across Europe economic growth is losing steam. Expansion in the countries sharing the euro will slow to 2.2 percent this year from 3.4 percent in 2000, according to Credit Commercial de France SA. Germany, the region's largest economy, may grow as little as 1 percent, the Berlin-based DIW economic institute forecasts.
As inflation slows along with the economy, calls on the ECB to trim rates are growing louder. The ECB last lowered its benchmark refinancing rate on May 10, to 4.5 percent from 4.75 percent, the first cut in two years. Futures contracts show that investors expect a quarter point rate cut by September.
French inflation slowed to an annual 2.2 percent in June from 2.5 percent in May. Reports showed that German and Italian inflation slowed in July.
Even so, overall inflation in the 12 countries that share the euro was 3 percent in June, above the ECB's 2 percent ceiling. The ECB has missed its inflation target for the past 13 months, the reason policy makers have refrained from lowering rates a second time.
Today's confidence report showed that an index measuring consumers' expectations for living standards fell to minus 23 last month from minus 20 in June.
A gauge of people's outlook for their personal finances to improve fell to 1 from 2, and consumers' assessment of their recent financial situation slid to minus 10 from minus 7, Insee said in today's report.
An index of people's saving plans receded to 47 from 49. Amid slowing inflation, an index of whether people think it's a good time to make major purchases increased to 6 from 4 in June.>> |
