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French Consumer Spending Rises More Than Forecast (Update1)

By Helene Fouquet

March 21 (Bloomberg) -- French consumer spending on manufactured goods rose in February from a 16-month low the previous month, spurred by sales of household goods and cars.

Spending by consumers, which accounts for about 15 percent of the economy, rose 1.2 percent from January, when it fell a revised 1.3 percent, Insee, the Paris-based national statistics office, said today. Economists expected a 0.5 percent rebound, the median of 18 estimates in a Bloomberg survey showed.

``What is surprising is the size of the rebound, not the rebound itself, which we expected,'' Mathilde Lemoine, chief economist at HSBC France in Paris, said in an interview today. ``French consumers continue to buy long-term durable goods, and cars are leading the purchases now after household equipment last year.''

Economic growth in Europe is easing more slowly than in the U.S., as demand for exports from Asia and eastern Europe and declining unemployment cushion the effect of higher prices and record energy costs. Insee forecast today the French economy will grow 0.3 percent in the second quarter, while the U.S. will stagnate, the Organization for Economic Cooperation and Development said yesterday.

Unemployment Declines

The Bank of France, the OECD and Insee all said French economic growth in the first quarter will pick up from the previous period, helping sustain job growth and spending.

Joblessness in France fell to a 24-year low of 7.8 percent in the fourth quarter, contributing to consumer spending jumping 3.7 percent in February from a year earlier.

The gains in French household spending contrasted with signs of growing pessimism among other consumers in Europe. Italian consumer confidence fell to the lowest in almost four years in March, a report by the ISAE research institute said today.

French consumer spending was also sustained by households digging into their savings in the face of rising prices, Insee said. France's inflation rate remained at a 12-year high in February as energy and food costs reached records, weighing on confidence.

Car Sales

Spending on cars rose 7.5 percent from the previous month after a 9.2 percent decrease in January and added 11.2 percent year-on-year, Insee said.

Car sales in France rose 4.6 percent in February, led by small and less polluting vehicles. Under new legislation, buyers of cars that produce less pollution than a government- established target receive bonus payments, while consumers who buy more-polluting vehicles must pay a levy of between 200 euros and 2,600 euros ($309 to $4,000).

Textile and leather goods rose 1 percent, following a revised 2.7 percent rise in January. From February of last year, they rose 0.8 percent.

Household good, which rose the most last year according to Lemoine, slipped 0.1 percent last month. From February last year, they jumped 11.7 percent.

To contact the reporter on this story: Helene Fouquet in Paris hfouquet1@bloomberg.net
Last Updated: March 21, 2008 06:13 EDT