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French consumer spending soars, surpasses 5-year peak

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French consumer spending unexpectedly surged in February, surpassing a peak reached five years ago before the eurozone debt crisis hit and a sign of brisk growth in the bloc's second-biggest economy at the start of the year.

[PARIS] French consumer spending unexpectedly surged in February, surpassing a peak reached five years ago before the eurozone debt crisis hit and a sign of brisk growth in the bloc's second-biggest economy at the start of the year.

Consumer spending, the traditional engine of the 2 trillion euro economy, rose 0.6 per cent in February, official data showed, confounding expectations of all the economists polled by Reuters who had pencilled in a flat reading on average.

The increase pushed the volumes of goods purchased by French consumers to a new all-time high, beating a previous record reached in February 2011, the INSEE statistics office said.

Last month's increase comes after January spending was revised up to show a rise of 1.0 per cent instead of 0.6 per cent, while consumer spending was also stronger in December, at 1.1 per cent, than the 1.0 per cent previously reported, INSEE said.

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The February increase was driven by a 1.5 per cent jump in food products purchases, especially meat and drinks, INSEE said, and a 1.1 per cent rise in spending on durable goods such as home equipment and mass-market electronics products.

Consumer spending on goods accounts for almost half of total consumer spending, which in turn contributes to more than half of France's gross domestic product (GDP). Coming after a strong increase in industrial output in January, the data bodes well for French growth in the first quarter.

The strong increase over the last three months is also likely to reassure the European Central Bank (ECB) that deflationary pressures are not changing consumer behaviour by pushing them to delay purchases.

French consumer prices fell for the second consecutive month in over a year in March, the statistics agency said in a separate report on Thursday, while prices charged by French producers were down a steep 4.1 per cent in February from a year ago.

The collapse in oil prices since mid-2014 has brought down gasoline, natural gas and wholesale electricity prices, boosting spending power in countries like France.

REUTERS

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