20000106

French consumers underpin steady growth view

PARIS: France is on target for continued strong growth in 2000, but early economic data for the year showed on Wednesday that some recent euphoria may have been overdone despite consumers remaining optimistic, analysts said.

National statistics institute INSEE reported its monthly household survey index was down at -2 in December after hitting its highest ever reading in November.

INSEE revised its November reading to 0 from an initial figure of 1, meaning the number of respondents who saw things improving matched those who saw them getting worse - which was a record in optimism for France's traditionally gloomy consumer.

The data was underpinned by a consistent fall in the jobless figures over recent months, confirming a rosy outlook for spending, analysts said.

"The reading was a little weaker than expected but it is still close to record levels and points to consumer spending remaining strong," said Gwyn Hacche, economist at HSBC.

"The data also reflects the fact that unemployment figures are tumbling at a rapid rate. All in all, it's pretty good news for France, which should continue to outperform both Germany and Italy this year and next."

France's economic recovery has been powered by a boom in consumer spending which was matched later in 1999 by a sharp turnaround in industrial output.

The Reuters Purchasing Managers' (PMI) survey last week showed manufacturing output rose further in December on surging domestic and export orders. The seasonally adjusted index hit a record 60.4 from 59.5 in November.

"It is normal to see some easing back in consumer confidence and given that PMI was still rising, I do not think it is at all worrisome," said David Naude, economist at JP Morgan.

"Since 1997, consumer confidence has overstated GDP outlook - last year's figures were indicating growth of around six percent, so clearly there was some exaggeration."

The French finance ministry has forecast economic growth of at least three percent in 2000 and the jobless rate could fall below 10 percent by 2001. Analysts' expectations for 2000 growth range between 3.5 and four percent.

"This month's (consumer confidence) figure may calm some of those who were rushing to predict four percent GDP growth this year," said Marc Touati, economist at Banque Populaire.

"The January index may continue this consolidation, and that may also help limit the risk of inflation," he added.-Reuters