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French confidence falters
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March 1, 2002: 6:21 a.m. ET
Consumer confidence falls on concerns over high unemployment, price rises
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PARIS (CNN) - French consumer confidence in the euro zone's second largest economy fell in February to the lowest level in five months as retail prices rose and unemployment remained high.
The French statistics offices INSEE said on Friday its consumer confidence index was minus 15 last months, down from minus 12 in January. A Reuters poll of economists had expected the index to be minus 11.7 in February.
Last month's confidence level was the lowest since the September 11 attacks in the U.S., and marks the first decline after three months of relative stability.
A survey of households by INSEE found that people were increasingly concerned about job prospects, even though the unemployment rate remained steady at 9 percent in January after rising in previous months.
There was also concern over higher costs for consumers, as some retailers took advantage of the introduction of euro notes and coins to hike prices on various items.
Economists said the sharp drop in consumer confidence was proof that the once strong French economy -- powered largely by household spending -- was finally feeling the full impact of the global economic slump, which caused the growth domestic product to contract in the fourth quarter of 2001.
"Over the last months, the fall in job prospects had not weighed too heavily on household behaviour in terms of spending and saving. Now a correlation is being established," Christian Parisot, an economist at Aurel Leven, told Reuters.
"The rise in unemployment over eight months is reaching consumers who think it less wise to make big acquisitions and prefer to put the money aside."
But many economists are optimistic that confidence will stablise in the coming months as the global slowdown begins to ease.
"The fall should not continue and by the second quarter consumer confidence should benefit from an economic improvement worldwide," Olivier Eluere, an economist at Credit Lyonnais, told Reuters.
High unemployment and rising prices will be among issues facing the European Central Bank and the Bank of England.
Both banks meet next week to decide in on interest rates. The ECB has left its key rate at 3.25 percent, after cutting it four times in 2001, while the BoE has held its benchmark at 4 percent, its lowest level in 37 years, after reducing the rate seven times last year. 
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