France Retail PMI March 2008

European retail sales fell in March as rising fuel, utility and food prices left shoppers with less money to spend, the Bloomberg purchasing managers index showed. The gauge of sales growth in the euro region declined to a seasonally adjusted 48.2 from 52.4 in February. A reading below 50 indicates contraction. Sales also fell from 2007, according to the index, which is based on a survey of more than 1,000 executives compiled for Bloomberg News by NTC Economics Ltd.


In France, retail sales rose for the third month running, with the increase supported primarily by higher food & drink sales values. The rate of growth was weaker than the previous two months (the index slipped from 58.8 in February to 53.3), but nonetheless remained robust and in marked contrast to the contraction seen throughout Q4 of last year.

France Consumer Confidence March 2008

Consumer confidence in France fell to a record low in March as accelerating inflation squeezes purchasing power. A gauge of consumer sentiment fell to minus 36, the lowest since the index was introduced in 1987, from minus 35 in February, Insee, the Paris-based national statistics office, said today.



Prime Minister Francois Fillon said this week the government is cutting its 2008 economic forecast to as low as 1.7 percent, citing the fallout from the U.S. housing recession. Accelerating inflation has deepened concern among French voters that President Nicolas Sarkozy will fail to fulfil his pledge to boost living standards, opinion polls have shown.

More than 80 percent of French people said they saw their purchasing power decline in the last 12 months, according to a poll last month by Paris-based Ifop institute. That was up from 65 percent in November and from 59 percent in January 2007.

France Inflation February 2008

France's inflation rate remained at a 12-year high in February as energy and food costs reached records. Consumer prices climbed by an annual 3.2 percent, the same as in January, based on European Union-harmonized methods, Insee, the national statistics bureau, said today in Paris. That's the fastest pace since 1996, when Insee began reporting the data. Prices increased 0.2 percent from January.



French energy prices climbed 18 percent from a year earlier in February and food rose 4.8 percent, today's report showed. Services such as health care increased 2.2 percent.

The price increases have affected consumer morale, sending confidence to a record low last month.

It has also hurt the popularity of French President Nicolas Sarkozy, who made purchasing power the centerpiece of his presidential campaign. Voters dealt him a setback in the first round of local elections March 10, preferring candidates from the opposition Socialist Party and its allies.

France Manufacturing and Services PMI February 2008

The February reading on the RBS/NTC Eurozone Manufacturing PMI - Purchasing Managers' Index - (a composite indicator designed to provide a single-figure summary of business conditions across the eurozone) registered 52.3 . The PMI was in line with the earlier flash reading and down from 52.8 in January, signalling a slight weakening in the rate of expansion to the second weakest level registered in the past two-and-a-half years. PMI readings among the big-four euro nations showed the widest variation for seven-and-a-half years, with continued solid growth in Germany and, to a lesser extent, France contrasting with near-stagnation in Italy and an accelerating rate of contraction in Spain. The PMI for Italy hit a two-and-a-half year low while Spain saw the sharpest rate of contraction since December 2001.

In France a dip in foreign orders and rising inflation dragged on French manufacturing activity in February the survey showed. The NTC/CDAF Index slipped to 53.8 in February from 53.9 in January, but kept above both the 50.0 mark separating growth from contraction and the series' long-term average of 53.1.



A sub-index for output fell to 56.0 in February from 56.4 in January, hitting its lowest point since November 2007. Chief NTC Economist Chris Williamson said France's manufacturers still lead Germany, Spain, and Italy in output, but warned the months ahead could present more problems.

Domestically, hiring in France picked up to its highest level since last July as companies took on staff to keep up with backlog of work. This is broadly consistent with the positive employment data we have seen coming out of France of late, and seems to suggest the contraction in umemployment will continue, at least for the time being.

Inflation concerns also rose in the February survey, with the input price index rising to 68.8 from 68.4 in January to reach its highest level since July 2007 and the output price index climbing to a 12-month high of 58.6 from 57.8. Rising prices have been the main complaint for French consumers and have driven recent falls in morale and spending.

Growth in France's services sector rebounded in February as sustained demand boosted activity from the two-year low it had hit a month earlier, and the NTC/CDAF Services Index (PMI) rose to 58.2 in February from 56.6 in January, clocking up a 56th consecutive month above the 50 floor for growth and bringing the 2008 level near to 2007's 58.6 average.



A sub-index that tracks new business growth rose to 57.2 from 56.1 in January, well off levels above 60 hit in recent years but still driving a service sector boom that has outshone Germany, Italy and Spain, the other major euro zone economies. "The rate of growth remains quite impressive," said Chris Williamson, chief economist at NTC.

Even so, France has been hit by several weaker-than-expected economic reports in recent weeks, especially with regard to consumer spending which drives a large part of the service sector. French growth slowed in the fourth quarter of 2007 in step with the global economic downturn, while January consumer spending suffered its biggest drop in over a year and February consumer morale fell to its lowest in more than 20 years.

Purchasing managers were more worried in February than in previous months, the survey showed. Its business expectations index fell to its lowest level in six months. "Because demand does seem to be more resilient in France among consumers, we've got more inflationary pressures," said NTC's Williamson. "The PMI's price indexes are still at worrying levels."

France Unemployment Q4 2007

France's unemployment rate declined more than expected in the fourth quarter of 2007 - falling to 7.8% - as measured by the labour force survey methodology, sustaining in the process consumer spending to some extent as economic growth slows.

The jobless rate dropped from a revised 8.2 percent in the previous quarter, Insee said today in Paris. Excluding France's overseas territories, the rate fell to a 24-year low of 7.5 percent from a revised 7.8 percent, based on International Labor Organization standards.



The French rate of economic growth fell in the fourth quarter and the International Monetary Fund cut its growth forecast to 1.5 percent this year from 1.9 percent in 2007. President Nicolas Sarkozy is counting on increased hiring to boost his popularity in municipal elections which are due this month.

Sarkozy's popularity has tumbled to the lowest since he took office in May as rising prices hammered consumer confidence. His approval ratings fell 4 percentage points to 38 percent this month, compared with 65 percent in July, a CSA/Le Parisien/i-Tele opinion poll showed today.


Among the population aged 15-64, 64.8 percent had a job in the fourth quarter, up from 64.4 percent in the third and 63.8 percent a year earlier, today's report showed. The previous quarter's overall rate was revised down from 8.3 percent and the mainland rate from 7.9 percent.

France Retail PMI and Consumer Confidence February 2008

Well, this week from France we have two different leading indicators - consumer confidence and retail sales - and they seem to be moving in different directions, which is rather strange to say the least.

Perhaps the clearest indication that the French economy may not be holding up as well as it was is to be found in the latest reading for France on the EU Economic Sentiment Indicator. France reported a deterioration in confidence, down to 105.2 in February from 107.0 in January.




Consumer confidence in France also fell to a record low in February as the fastest inflation in 12 years squeezed purchasing power. A gauge of consumer sentiment fell to minus 35, the lowest since the index was introduced in 1987, from minus 34 in January, according to the latest data from Insee, the Paris-based national statistics office.



More than 80 percent of French people said they saw their purchasing power decline in the last 12 months, according to a poll by Paris-based Ifop institute. That is up from 65 percent in November and from 59 percent in January 2007.


The sub component measuring consumers' sentiment about their current standard of living declined to minus 68 from minus 65, the INSEE report showed, while the sub-index evaluating the outlook for living standards rose to minus 42 from minus 44. The personal financial situations component was unchanged at minus 25. The report showed more people may delay big purchases as that component fell to minus 26 from minus 24.

People are evidently worried about rising prices, and President Nicolas Sarkozy, who made purchasing power the centerpiece of his presidential campaign, is facing his lowest popularity rating since he took office in May.

Consumer prices climbed by an annual 3.2 percent in January, according to the European Union-harmonized index, up from 2.8 percent in December and the fastest since the statistics office began reporting the data in 1996.



Food costs jumped 4.2 percent in January, compared with a 3.1 percent increase in the prior month. Meanwhile, oil prices surged to a record above $102 a barrel last week as the dollar fell below $1.50 against the euro for the first time.

Obviously all of this is causing quite a fuss in France, and a study by the Institut National de la Consommation published last week showed French supermarket food prices are rising faster than raw-material costs. The Paris-based consumer group found the biggest price jumps were for baby milk, pasta, ham and yogurt, which climbed between 40 percent and 48 percent in the six weeks to Jan. 9, based on a survey of 1,055 food prices on the Web sites of five of France's biggest chains.

That this uptick in inflation is bound to give all policymakers a major headache was perhaps underlined by the recent admission by French President Nicolas Sarkozy, who has been one of Jean Claude Trichet's strongest critics, that accelerating inflation in France "worries me". So it should do, and especially since it is seriously going to restrict the hands of policymakers over at the ECB.

Prime Minister Francois Fillon said during the week that the French government is investigating food-price increases and suppliers' profit margins, but Insee's consumer report showed consumers are not particularly reassured by government promises or by the firm ECB stance at this point, since they anticipate that inflation may continue to accelerate with the component for price expectations dropping to minus 23 from minus 11.

To some extent these concerns by French consumers are also borne out by the latest data for French producer prices also released by INSEE this week. French producer prices rose 0.5% month-on-month in January, up from a revised 0.1% rise in December. Producer price inflation for December was revised down from 0.2% initially estimated. Producer prices rose more than the 0.4% increase expected for January. On an annual basis, producer prices climbed 4.9% in January, while economists were looking for 4.8% growth.

Industrial producer prices, excluding energy and agri food, were up 0.5%, following a 0.1% fall in December. The annual growth in the index stood at 1.6%. Industrial import prices gained 0.4%, after recording 0.4% fall in December. Over the last year, import prices rose 4.6%. Excluding energy and agri food, import prices increased 0.4% month-on-month and decreased 0.5% from the prior year. What is, I suppose, most disturbing about this whole picture is the way in which some inflation components are accelerating even as the euro continues to reach ever newer highs, which should, in principle, be serving to slow inflation.



Not everything coming out of France this week has been unequivocably bad news though, since the retail sales purchasing managers index shot up in February.




In fact French retail sales advanced the most in 20 months in February, driven by declining unemployment (another piece of positive news) and seasonal discounts, the NTC Economics compiled Bloomberg purchasing managers index showed. The measure of sales climbed to a seasonally adjusted 58.8, the highest since June 2006, up from 56.2 in January, the survey which is based on the responses of 390 retail executives showed at the end of last week. A reading above 50 indicates expansion. Possibly also of note here was that retailers, who stressed that they faced higher purchasing prices, reported declining margins, with this index component decreasing to 48.8 from 50.8 in January. Some of them also reported squeezing prices to attract customers.

But at the end of the day, France's steadily improved employment numbers may well help to continue to underpin consumption to some extent.