French consumers shunning brighter data

French consumers turned gloomier about living standards in July, official data showed yesterday, contrasting with an improvement in leading economic indicators this week.

Consumer spending is considered to be the key driver of growth in the French economy, but the household confidence data published by the official statistics agency INSEE showed a two-point fall in July from the level in June.

The July index stood at minus 39 points, from minus 37 in June, minus 40 in May and April, minus 42 in March and minus 43 in February.

On Thursday the French industrial confidence index edged up in July for the fourth month running and on Wednesday official data showed a second-quarter rebound in consumer spending but a big component of this was new car sales, supported by crisis subsidies.

Experience from past downturns shows that evidence of improvement in the underlying economic situation can take several months to become apparent to the public and many small businesses, once leading indicators such as industrial and purchasing manager confidence signal a possible flattening out or upturn.

INSEE said that, in July, nearly all of the assessments making up the overall household confidence index turned gloomier.

The attitude of households to their past and future living standards fell and an increased number of French people estimated that their own financial situation had worsened in the past 12 months.

However, they were slightly more optimistic about their future prospects, but still thought that the time was not right for any decision to make big purchases.

Also in July, there was a slight fall in the number of households thinking that unemployment would rise in coming months, but the overall view that unemployment would rise remained extremely high.

French consumers took the view that prices had not risen much in recent months and they continued to think that inflation would remain low in coming months.

The percentage of consumers believing that the time was right to save had fallen slightly but more households thought that they would be able to save in the next few months.