UPDATE 1-Heating cold houses gives unexpected boost to French spending

Tue Apr 30, 2013 4:02am EDT

* Consumer spending up 1.3 pct m/m, down 0.4 pct q/q

* Spending up on energy, food, down on clothes

By Ingrid Melander

PARIS, April 30 (Reuters) - French consumer spending rebounded in March, largely thanks to increased household heating to combat unusually cold weather, but it was not enough to stop a quarter-on-quarter decline.

Consumption, which accounts for over half of France's output, is the motor of the French economy but high unemployment is making households cautious about spending.

The March 1.3 percent increase beat analyst expectations of an 0.1 percent rise. Spending was down 0.4 percent in the first quarter after the first annual contraction in nearly two decades in 2012, INSEE statistics service data showed on Tuesday.

The cold weather was behind most of March's increase. Households spent 2.8 percent more on energy than in February and 11.2 percent more than a year ago. They also spent more on food but less on clothes and shoes.

The government forecasts that household consumption will barely grow by 0.2 percent overall this year and contribute to keeping the economy just out of recession.

But many economists view the forecast as too optimistic and instead predict a slight contraction at a time when INSEE data shows consumers have the most pessimistic view on record on how their standard of living will evolve

Opinion polls have shown recently that people in the euro zone's second-largest economy expect their purchasing power to contract further this year after shrinking in 2012 for the first time in nearly thirty years.

A Mediaprism survey showed earlier this month that 77 percent of respondents reckon purchasing power will contract. Some 58 percent plan to cut spending in the coming months.

Around two thirds will cut down on leisure activities and nearly as many on clothing and 40 percent will spend less on food, the survey showed.

In contrast, in EU powerhouse Germany, criticised in France for insisting on austerity, consumer morale rose to its highest since October 2007, data showed on Tuesday.

Consumer confidence in the euro zone as a whole started to rebound at the end of last year and improved again in April, according to a monthly survey from the European Commission.

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