French Consumer Confidence Improves Slightly In September

French consumer confidence rose for the first time in more than a year in September as falling fuel prices left people with more to spend on food and clothing. The monthly consumer confidence servey carried out by the national statistics office came in with a reading of minus 44, up from a revised record-low of minus 47 in July, the last month for which the survey was held.




The price of oil has now fallen by around a third from its record in July. Still, crude remains at more than $100 a barrel and is 33 percent higher than a year ago, while the continuing crisis in global financial markets may act as a constraint on consumers' ability and willingness to spend in coming months.

Thus despite the uptick in confidence French consumer spending on manufactured goods actually fell in August. Household spending on manufactured goods, which accounts for about 15 percent of the French economy, fell 0.3 percent from July, when it rose 0.4 percent, according to data from Insee. From a year earlier, spending declined 0.1 percent.

The French economy shrank 0.3 percent in the second quarter, the first contraction in more than five years, according to the detailed figures released by INSEE today. Household spending fell an annual 0.1 percent, while exports declined 1.7 percent, from an increase of 2.6 percent in the first three months.

French Business Confidence Down Again In September

French business confidence fell to its lowest level in five years in September. An index of sentiment among 4,000 manufacturers fell to 92 from a revised 97 in July, according to the French national statistics office INSEE. That was the lowest reading since August 2003.



The sub-index measuring sentiment on the economic outlook fell to minus 42 from a revised minus 33 in July; the outlook for orders dropped to minus 24 from a revised minus 19; and the foreign orders component slipped to minus 27 from a revised minus 16. The measure of French executives' outlook for their own production fell from a revised minus 1 to minus 10.

Europe's manufacturing and service industries contracted at the fastest pace in almost seven years in September according to the flash reading on the composite purchasing managers index. French manufacturing contracted at the fastest rate in several years, while French services showed a very slight expansion. The French economy contracted for the first time in more than five years in the second quarter, shrinking by 0.3 percent from the first three months. Thus the situation must be touch and go whether we see a technical recession in the third quarter, or whether the French economy just manages to scrape a slight expansion by a hair.

French Consumer Spending Falls In August

French consumer spending on manufactured goods fell in August after the euro region's second-largest economy shrank and shed jobs. Household spending on manufactured goods, which accounts for about 15 percent of the French economy, fell 0.3 percent from July, when it rose 0.4 percent, according to data from Insee, the national statistics office, earlier today. From a year earlier, spending declined 0.1 percent, the first year-on-year drop since September 1997.

Spending on cars in France slipped 1 percent in August from the previous month, and purchases of clothes and leather goods dropped 1.9 percent, compared with a 0.1 percent decrease in July, Insee said today. Spending on home appliances and furniture rose 0.6 percent.

Eurozone Flash PMI's For Manufacturing And Services Indicate Continuing Contraction

Europe's manufacturing and service industries contracted in September at the fastest pace in nearly seven years as continuing problems in credit-markets slowed lending and borrowing and companies scaled back production in response to slowing orders. The Royal Bank of Scotland Group composite purchasing managers index dropped to 47 - down from 48.2 in August - and the lowest since November 2001.

While these are only initial flash estimates, and we will need to wait to see the detailed confirmation on October 1st, this extended contraction in both manufacturing and services industries does suggest that it is now touch-and-go whether the eurozone economy will contract for a second consecutive quarter in Q3 2008, making for the first collective recession since the single currency was introduced.

The manufacturing index fell to 45.3 this month, down from 47.6 in August, while the services index fell to 48.2 from 48.5.

French Manufacturing Contracts Drastically, While Services Unexpectedly Expand


The French manufacturing PMI continued to indicate contraction in September, with the reading falling to 43.6, a much sharper rate of decline than the 45.8 registerd in August. This is the fastest pace of decline in manufacturing production since October 2001, with output being dragged down by very weak domestic demand, which prompted a huge decline in new orders, according to the statement by Markit Economics.




The service sector, on the other hand, showed unexpected strength, rising to 50.4 in September from 48.0 in August.

France's unemployment rate held steady in the second quarter of 2008 following 15 months of continuous declines. The jobless rate stayed at 7.6 percent in the April-June period, according to data from INSEE the French statistics office. Excluding France's overseas territories, the unemployment rate was 7.2 percent, a 25-year low.

Companies are evidently becoming more reluctant to hire as consumer spending wanes, while a  46 percent rise in oil prices in the past year adds to costs. Gross domestic product fell 0.3 percent in the second quarter, and Prime Minister Francois Fillon now sees the economy growing about 1 percent this year, significantly down from a previous forecast of  2 percent.


Company investment, consumer spending and exports all declined in the euro region in the second quarter, pushing the member state economies closer to a recession. The 0.2 percent economic contraction in the three months through June was the first since the introduction of the euro almost a decade ago. Companies are also facing tighter credit conditions as the European Central Bank keeps interest rates at a seven-year high and banks remain reluctant to lend in the wake of the U.S. subprime mortgage market collapse.

In fact the French economy lost jobs for the first time in more than four years in the second quarter. The deterioration in the labor market comes at a time when inflation is accelerating at the fastest pace in 12 years, weakening consumer spending and aggravating the slowdown.

Insee also revised up the unemployment rate for the first quarter to 7.6 percent from the 7.5 percent initially reported. 

French Manufacturing Contracts Again In August

Manufacturing activity in the euro zone contracted for the third straight month in August, as German firms reported shrinking output for the first time in three years. The PMI for the euro zone's factory sector rebounded slightly and  rose to 47.6 in August from 47.4 in July, data from research group Markit Economics showed on Monday, beating expectations for a rise to 47.5. But the measure still indicated that output is shrinking (if a little more slowly)  since a reading above 50 signals growth, while a level below 50 signals contraction.



The data showed that Germany and Spain recorded very sharp decreases in export orders, while employment in the currency bloc fell for the third straight month. Price pressures eased somewhat, but remained at high levels, underlining the European Central Bank's dilemma as it tries to balance high inflation levels and slowing growth across the region. Germany's PMI was revised down to 49.7 in August after 50.9 in July - marking the first contraction since the third quarter of 2005.

The French PMI fell to 45.8 in August from 47.1 a month earlier, beating expectations for a drop to 45.1.



Italy's PMI rose to 47.1 compared with 45.3 a month earlier. Spain's manufacturing PMI hit 42.4 in August compared with 39.2 in July. Manufacturing activity edged up in Spain and Ireland but remained at very low levels, with Spain's reading the third lowest in the survey's 10-year history. The euro-zone manufacturing PMI is based on data from Germany, France, Italy, Spain, Ireland, Austria, Greece and the Netherlands, which account for about 92% of the bloc's manufacturing activity