France Consumer Confidence June 2008

Consumer confidence in France fell to a record low in June as the fastest inflation in 12 years steadily erodes household purchasing power. The consumer sentiment index dropped to minus 46, the lowest since the scale was introduced in 1987, and down from a revised minus 42 in May, according to the Paris-based national statistics office, Insee, earlier today.



The sub index measuring the individuals outlook for their personal financial situation declined to minus 23 from minus 19, while the outlook for the standard of living sub index fell to minus 57 from minus 50.

French consumer prices climbed at an annual 3.7 percent rate in May, exactly matching the rate for the euro region for the month.

France Business Confidence and Housing Starts June 2008

French manufacturers confidence held at the weakest in more than two years in June and housing starts slumped in May, suggesting that growth in the euro-area's second-largest economy is faltering.

An index of sentiment among 4,000 manufacturers was unchanged at 102, according to Insee, the Paris-based national statistics office. In France, Insee's manufacturing confidence indexes for May and June were the weakest since December 2005.



Housing Sector

Housing starts dropped by 21.6 percent in the three months through May from a year earlier, while sales of new homes fell by nearly 28 percent in the first quarter to 26,700 units. If this pace continues it may well amount to a shock similar to the crisis at the beginning of the 1990s.

The root of the problem seems to be that lending organisations do not have confidence in the European Central Bank’s strategy for refinancing banks. The average fixed interest rate on 20-year loans has recently risen above 5.0 percent for the first time since 2003. As global financial conditions turned down dramatically with the US subprime home-loan crisis from last August it looked as if France would be spared a severe correction, since recent French practice, and the lessons of the property crisis in the 1990s - it was argued - meant that banks had maintained a high level of prudence in lending.

But now property experts are wondering openly, how far and for how long the market will go down, and they also expect to see a sharp fall in the number of estate agencies which mushroomed during the boom.

Signs of a marked cooling have been emerging for months, and on Friday the national statistics office INSEE said bluntly: “France, too, is now experiencing a real-estate market downturn.


Consumer Spending in May

On the other hand French consumer spending on manufactured goods increased more than economists expected in May as shoppers bought more cars and clothes. Such spending, which accounts for around 15 percent of the French economy, rose 2 percent from April, when it fell a revised 0.9 percent, according to data from Insee, the national statistics office. The May increase was the first in three months.

Manufacturing and Services PMIs Flash Estimate June 2008

The French economy may well be contracting in June. According to Markit Economics who released data on the purchasing managers indexes for manufacturing and services earlier today, both fell into contraction territory in June. According to the flash estimates, the manufacturing PMI fell to 49.2 - its lowest level in more than three years - after rising to 51.5 in May.



"The drop in output reflected a contraction of new orders for the second time in the past three months, with the principal weakness of demand centred on the domestic market as export orders fell only slightly," Markit said in a press release.

The services PMI for France also slipped to 49.2, after falling to 50.5 May. The services PMI is now at its lowest level since November 20



Services have obviously been contracting for several months now, at least according to this indicator.

INSEE Lowers French 2008 Growth Forecast

The French economy will expand by 1.6 percent this year, the slowest pace in five years, as rising prices damp consumer spending and the housing market slumps, the government statistics office said today. The economy is now expected to grow by 0.2percent in the second quarter, the slowest pace in almost two years and a third of the pace in the first three months, Insee said in its quarterly report. The economy may well stagnate in the third quarter and grow 0.2 percent in the final three months, Insee said.

France Inflation May 2008

French inflation accelerated to the highest in more than 12 years in May on rising energy and food costs. French Eu harmonised consumer prices rose by an annual 3.7 percent, as compared with a rate of 3.4 percent in April, according to data from Insee, the national statistics bureau, today in Paris. The inflation rate in May was the highest since 1996, when Insee began reporting the data. Prices rose 0.6 percent from April.



French household spending on manufactured goods fell 0.8 percent in April from March, the third decline in four months, and consumer confidence dropped to a record low last month, suggesting that economic growth is slowing this quarter.

France Industrial Output April 2008

French industrial production rebounded in April following a drop in March, led by output of cars, electrical equipment and chemicals. Production at factories and utilities, which accounts for around 15 percent of the French economy, was up 1.4 percent month on month from March, when it fell 1 percent, the national statistics bureau, Insee, said today in Paris.

French manufacturing, which excludes energy and food output, increased 1.7 percent on the month, Insee said today. From March 2007 earlier, industrial output rose 3.2 percent and manufacturing increased 2.8 percent.

France External Trade April 2008

France's trade deficit fell back again in April as exports rebounded from a three-month low and imports fell for a third consecutive month, signaling domestic growth may be slowing. The gap shrank to 3.72 billion euros from 4.27 billion euros in March, which was revised from a shortfall of 4.7 billion euros, according to the Trade Ministry in Paris on Friday.



French consumers and manufacturers are facing rising production costs from the near-doubling in crude oil prices in the past year.

Imports fell to 38.68 billion euros from 38.75 billion euros and exports rose to 34.97 billion euros, from 34.48 billion euros in March. Airbus delivered 22 planes for 1.1 billion euros in April, after supplying 28 aircraft worth 1.5 billion euros in March.

French Unemployment Q1 2008

France's unemployment rate dropped to 7.5 percent in the first quarter as the euro region's second-biggest economy expanded at double the pace of the previous three months. The jobless rate fell from 7.8 percent in the fourth quarter, according to Insee, the France's economic statistics office. Not including France's overseas territories, the unemployment rate was 7.2 percent, the lowest in 25 years.

France's economic growth accelerated more than economists forecast in the first quarter as stronger exports offset weaker household spending. Still, inflation near the fastest in 12 years is eroding consumer sentiment, signaling expansion may be set to slow this quarter.

Gross domestic product expanded 0.6 percent in the first quarter from the previous three months, when it grew 0.3 percent, Insee reported May 15. French Minister Christine Lagarde expects the economy to grow between 1.7 percent and 2 percent this year, down from 2.2 percent in 2007.


There are signs growth is slowing. Manufacturing and service industries barely expanded in May according to the purchasing managers indexes and retail sales suffered the biggest annual decline in April since records began in 1995.

Christine Lagarde said in an interview with France Info radio today that the percentage of the working-age population in jobs rose in the first quarter to 65.1 percent from 64.7 percent.

France Services PMI May 2008

Euro zone services activity slipped close to contraction in May, in line with expectations, as growth took a sharp hit in France, while inflationary pressures mounted, a key survey showed on Wednesday. The RBS/NTC Eurozone Services Purchasing Managers index fell to 50.6 in May, the same level as the flash estimate and as forecast by economists, from 52.0 in April.

The rate of expansion in the French services sector was down again in May according to the NTC purchasing managers' index. The index was revised down to 50.5 from a provisional figure of 50.7, compared with a reading of 52.8 in April, and is now only just above the 50 dividing line which separates expansion from contraction.

France Manufacturing PMI May 2008

NTC Economics reported on Monday that the French manufacturing purchasing managers' index came in at 51.5 in May, up from both the expected 51.3 reading and the previous month's 51.1 level.




However, new orders, suppliers' delivery times, stock of purchases and quantity of purchases were the only categories which saw improvements in May, rising to 51.2, 45.7, 49.2 and 51.3 from 48.6, 43.9, 47.5 and 50.4 respectively.

"Although there were signs of firmer domestic demand, with new orders rebounding modestly following April's decline, exports remained a drag on order books as the strong euro and soft demand in the US and elsewhere continued to weigh on foreign sales," economist Jack Kennedy at NTC Economics said in a press release.

Kennedy concluded that the manufacturing sector would not contribute significantly to French economic growth in the second quarter of 2008 and that the jump seen in Q1 will not be seen in the following quarter.