French Consumer Spending Jumps, Lifted by Car Subsidy
Written on October 24, 2009
French consumer spending rose in September for the first time in three months as lower energy prices lifted disposable income and government incentives boosted car sales.
Spending on manufactured goods advanced 2.3 percent from August, Paris-based national statistics office Insee said today. Economists expected a 0.5 percent gain, a Bloomberg News survey showed. Spending on cars rose 10 percent.
French households, grappling with a recession while also benefiting from state stimulus measures and lower energy prices, have spent erratically this year. Spending gained in four and fell in four of the first eight months, a volatility set to continue even as growth in unemployment slows, economists say.
“Unemployment isn’t as bad as people thought it would be and lower energy prices are helping spending power,” said Laurence Boone, chief economist at Barclays Capital France SA in Paris. “Spending remains fragile, though we should now be in a catching-up phase.”
While 2.55 million people are actively looking for a job in France, the most in almost four years, the rise in the jobless rate has slowed as France emerged from a recession. The 18,100 increase in unemployment in August was a tenth of the number registered in February and half that posted in May. The Labor and Finance ministries report September unemployment claims on Oct. 26.
Car Incentives
“Consumer spending is holding up,” Finance Minister Christine Lagarde said in a statement. Spending on appliances grew 0.2 percent, while demand for clothes advanced 2.9 percent, today’s report showed.
Car manufacturers and auto-parts makers benefited as the government offers 1,000 euros ($1,500) to buyers who trade in old cars to buy new ones. While Lagarde said the impact of the car incentives on consumption “remains significant,” they will be phased out starting in January.
“Looking forward, we think that consumer spending will remain lackluster,” said Joost Beaumont, an economist at Fortis Bank Nederland in Amsterdam. “Worsening labor market conditions will come to the fore while the impact of the car scrappage scheme will fade.”
Filed in: marketing.