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French consumers more confident, PM upbeat on growth

[PARIS] France will achieve solid growth faster than expected, Prime Minister Manuel Valls said on Friday, as data showed households more optimistic than they have been in four and a half years.

Speaking two days ahead of local elections where his unpopular Socialist party expects a severe defeat, Mr Valls said improving economic data meant growth could be strong enough to bring unemployment down this year.

"International institutions have all said that when we get a rate of growth around 1.5 per cent, that is in 2016, unemployment will fall. I think we can expect, will achieve, that level of growth sooner," he told iTELE television.

The number of people out of work in France rose again in February after a short-lived decline the previous month as the eurozone's second-biggest economy struggles to revive its job market, figures released earlier this week showed.

The Socialist government's failure to meet a pledge to cut record-high unemployment has angered voters and is a key factor behind President Francois Hollande's unpopularity.

Other economic indicators have started improving, backing government expectations that France is pulling out of years of stagnation.

The official forecast for 2015 is for one per cent growth after the 2-trillion economy barely eked out 0.4 per cent extra output in each of the past three years.

French consumer confidence rose to its highest level since November 2010, the INSEE statistics agency said on Friday, although it was still far from its long-term average.

INSEE said households' concerns about unemployment were at their lowest since October 2013.

Consumer spending increased by 0.6 per cent in 2014, twice as much as the previous year as households' purchasing power increased by 1.1 per cent after being flat in 2013.

Another bit of good news for the government this week was a smaller-than-expected public deficit in 2014 as local authorities curbed their investments. Paris hopes this will ease its negotiations with eurozone peers on its budget and reform plans.

Growth is nevertheless seen resuming slowly. Housing starts dropped again in the three months to February, data showed on Friday, although at a slower pace than the previous three months.

While French consumers spend more overall and are more confident, their investments - essentially real estate - dropped by nearly 6 per cent last year, a contraction nearly double that of 2013.

The Socialists are expected to be the main losers in the second round of elections on Sunday that are set to see the far-right National Front extend its gains.