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Sunday, October 30, 2005

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French consumer gloom proves tough nut to crack
10/30/2005
 

          PARIS, Oct 29 (Reuters): French consumers are refusing to be infected by the mounting optimism of business chiefs, with concern about inflation and the impact of economic reforms seen as culprits for entrenched gloom.
The latest evidence of diverging sentiment came Friday with consumer morale sinking back in October to its lowest since the series began in late 2003, in contrast to a report Monday that showed business confidence hit an 8-month high in October.
Households are refusing to cheer up even though the jobless rate has fallen in three of the past four months and despite other indications that the euro zone's second biggest economy has turned the corner and is starting to pick up.
That is disappointing news for Prime Minister Dominique de Villepin, who made cutting jobless queues a priority in the hope this would lift consumer morale. And analysts said it could end up preventing economic recovery from becoming broadly based.
"Concerns about structural reforms, pensions, job security, and a whole range of similar issues, are holding back consumer confidence and won't go away any time soon," said Ken Wattret, chief euroland market economist at BNP Paribas.
"The reform process is inevitable but because it is slow, it is hanging like a dark cloud over households without having a dramatic impact on the economy and growth."
Analysts said it may take more than a couple of months of declining unemployment to lift French consumer sentiment given the underlying causes of their gloom is more deep rooted.
Economists also cited insecurity about the outlook for personal finances which is being stoked by households' concern that their purchasing power is being eroded.
France is not the only euro zone country where consumer sentiment is failing to keep pace with improving business morale-this has also been seen to some extent in Germany and Italy.
Pushing reforms through more quickly may help the health of the economy but that looks politically unfeasible in France.

 

 
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