* French economy remains anaemic, say CEOs
* Consumer spending shrank in January
* Retailers forecast slight growth at best
* Public projects key for weak building sector
By Natalie Huet
PARIS, March 10 French companies see little hope
for domestic growth this year and are stepping up efforts to cut
costs and fine-tune product lines to contend with stubbornly
tough market conditions.
While the economies of Germany, Britain and even Ireland
have made significant progress, France has produced a mixed bag
of macroeconomic data and was warned by the EU last week that it
is lagging behind euro zone peers and not doing enough to cut
labour costs, trim public spending and boost competitiveness.
Unveiling 2013 results over the past month, the bosses of
some of France's top companies had a common message on the euro
zone's second-biggest economy: they don't expect the country to
be worse off in 2014, but neither are they counting on any clear
Key industrial sectors are at 20-year lows and unemployment
is stuck above 10 percent, crimping the household consumption
that has been a traditional driver of growth. Construction
companies fear that state spending - the one factor supporting
domestic business - will be a casualty of government efforts to
reduce the public deficit.
There was more downbeat news on Monday when the French
central bank forecast that the economy will grow by 0.2 percent
in the first quarter, down from 0.3 percent growth in the fourth
quarter of 2013. Separate data showed industrial output fell 0.2
percent in January, against analysts' expectations of a rise.
January consumer spending also shrank unexpectedly, with
falling car sales weighing particularly heavily. The 2 percent
decline in spending represented the biggest drop in two
"We just have to get used to this environment and not hope
for a way out of this crisis that may not happen," Xavier de
Mezerac, finance chief of supermarket chain Auchan, said on
Monday as he forecast anaemic domestic demand this year.
Like many rivals, France's fifth-largest food retailer has
been cutting prices and has even put smaller, cheaper goods on
its shelves at the end of each month to appeal to workers
anxiously awaiting their pay cheques.
Carmakers Renault and PSA Peugeot Citroen
have already cut staff and wages to adjust capacity to
a demand slump that sent output to a 20-year low in 2013, though
Renault has enjoyed notable export success with its low-cost
FEWER "GRANDS PROJETS"
The shrinking construction sector, meanwhile, is facing a
predicted 10-12 percent slide in sales of new homes this year,
with Standard & Poor's forecasting a 3 percent drop in house
prices after a 2 percent dip in 2013.
Builders Bouygues, Vinci and Eiffage
have all been pinning their hopes on orders abroad
while focusing on higher-margin projects at home. Bouygues, for
example, is revamping the Ritz Hotel in Paris.
Vinci and Eiffage acknowledged that a large chunk of their
domestic revenue came from public projects, notably a high-speed
railway linking the central city of Tour to Bordeaux on the west
Eiffage said that small-to-mid-scale projects such as
construction or repairs to hospitals and universities remain its
bread and butter, but Vinci warned that public orders could dry
up as President Francois Hollande's government seeks 50 billion
euros ($69.31 billion) in budget savings from 2015 to 2017 to
bring public finances into line with EU targets.
"Will there be large projects in France in the next few
months or years? The answer is probably not very many, at least
with the French government as the final client," Vinci Chief
Executive Xavier Huillard told analysts.
One important exception is a pending 3.6 billion euro
public-private deal to improve the country's motorway network,
involving Vinci, Eiffage and Abertis unit Sanef. But
for the time being, local elections this month could prompt
mayors to put projects on hold, especially road-building plans.
It should come as no surprise, therefore, that French stocks
dumped by investors during the economic crisis have failed to
match the recovery of Germany's DAX index.
Yet the recent sell-off in emerging markets has provided a
silver lining for those stocks with most exposure to the French
market. Shares in companies from carmakers and builders to
telecoms group Orange have achieved gains of 16-24
percent since the start of the year.