|
|
Cold weather pushed up French consumers’ heating bills last month but their spending on other goods stagnated, while firms saw their profit margins squeezed to their tightest in nearly 30 years due to higher taxes and weak growth.
With a cautious eye on near record unemployment of 10.9%, consumers appear reluctant to play their usual role as the motor of French growth, while businesses have been unable to take up the slack in Europe’s second-biggest economy.
Overall consumer spending rose 1.4% last month, driven up by a 7.5% rise in energy bills in colder weather, INSEE statistics agency figures shows. That was well above economists’ average estimate for a rise of only 0.4% as polled by Reuters.
Spending on manufactured goods rose just 0.1%, however, as households avoided big purchases amid high unemployment and dwindling purchasing power.
In a separate report on third-quarter economic output, INSEE said households’ real gross disposable income fell 0.1% in the third quarter, pinched by a rising tax bill, while their savings rate remained high at 15.6%.
With higher taxes and welfare contributions hitting businesses, the corporate sector saw profit margins fall to 27.7%, the lowest level since the end of 1985.
The report also confirmed that the economy shrank 0.1% in the third quarter, although INSEE revised up its second-quarter reading to a growth rate of 0.6% from 0.5%.
The agency estimated last week that the economy rebounded slightly in the final three months of the year with growth of 0.4%.
It forecast, however, that growth would be too weak to get unemployment firmly on a downward trend as President Francois Hollande has promised to do.
With his economic credibility on the line with voters and EU partners, Hollande is struggling to rein in the public finances in the face of lacklustre growth and high unemployment.
In rare good news on that front, data from INSEE showed that the public debt eased in the third quarter to 92.7% of gross domestic product from 93.5 at the end of the previous three months.
The government expects the public debt to reach 93.4% of GDP this year before peaking at 95.1% next year.
France escaped recession with the second quarter growth, but would fall back into recession if it posted a second consecutive quarterly contraction at the end of this year.
INSEE predicted growth of 0.2% for the whole of 2013.
The latest figures point to continuing challenges for France, which has seen its recovery wilt while neighbouring Germany continues to post solid growth. Much of the German success has been due to exports, but INSEE figures show France struggling to sell more of its products abroad.
Exports fell by 1.3% in the third quarter, after having increased by 1.9% in the previous three-month period.
Imports continued to increase, however, rising by 0.9% after rising by 1.5% in the second quarter.
Thus foreign trade provided a net negative contribution to GDP in the third quarter, of 0.6 points, after having been made a positive contribution of 0.1 points in the second quarter.
Household spending, an important element in the French economy, rose by only 0.1% in the third quarter as household purchasing power declined by 0.1%.
