French consumer spending buoys growth outlook
By Matthew Green
PARIS: French consumer spending raced ahead in February, beating
expectations and bolstering prospects of robust economic growth in France
Spending jumped 2.2 percent month-on-month in February, shooting past
average predictions of a 0.3 percent increase and building on a revised 2.0
percent rise in January, according to data from French national statistics
"The consumer data is exceptional, we expected much less. The upward
revision of the January figures make the February data even stronger," said
Exane economist Emmanuel Ferry.
Economists said the data suggested economic growth would hit 3.5 percent
this year, up from 2.7 percent in 1999, as consumer spending expanded its
role in pushing France to the forefront of the euro-zone recovery.
"This confirms consumer spending will be a major factor supporting growth in
2000," said Marie-Pierre Ripert, economist at CDC Marches.
Economists said steady declines in French unemployment would further bolster
sentiment and help consumer spending grow by 2.9 percent in 2000 from 2.3
percent in 1999.
Spending was particularly strong on durable goods, rising 3.5 percent in
February from 2.2 percent in January, boosted by a recovery of car
purchases, which rose 3.8 percent after falling 0.1 percent in January.
The high figure was partly explained by a late start in January sales that
extended the discounting period into February and encouraged more spending
during the month.
Economists said an unexpected 40 billion francs of cuts in income, sales and
housing taxes announced by Socialist Prime Minster Lionel Jospin last week
would give consumer sentiment an extra lift in coming months but risked
boosting growth too quickly.
DATA RAISES QUESTIONS ABOUT JOSPIN'S TAX CUTS
"It puts a big question mark over Jospin's mini-budget...It is totally
inappropriate to give the economy a further boost when it is already growing
so strongly," said Gwyn Hacche, economist at HSBC.
Economists said the figures provided the latest evidence of healthy
euro-zone growth that could force the European Central Bank (ECB) to rise
interest rates sooner rather than later.
"The economic situation in the euro zone is very robust and interest rates
at 3.5 percent are looking increasingly innappropriate," said Robert Lind,
economist at ABN Amro.
But rising inflation in fellow euro zone heavyweights Italy and Germany is
still likely to prove more of a headache for the ECB than in France, where
price rises are below the euro zone's 2.0 average.
Final annual inflation figures for February confirmed preliminary data that
showed consumer prices rose by 1.0 month-on-month, trimming the annual rate
to 1.4 percent from 1.6 in January, suggesting inflation had peaked for the
Economists said they would be looking for confirmation from January
industrial production figures due on Friday to see whether France's
factories, which slowed a shade in December, would support the consumer
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