French Consumer Confidence Rises on Oil Price Decline

By Francois de Beaupuy

Sept. 26 (Bloomberg) -- French consumer confidence unexpectedly rose for the first time in more than a year in September after falling fuel prices left people with more to spend on food and clothing.

A gauge of consumer sentiment rose to minus 44 from a revised record-low minus 47 in July, the last month reported, the Paris- based national statistics office, Insee, said in a statement today. Economists expected a reading of minus 47, according to the median of 20 forecasts in a Bloomberg News survey.

The price of oil has fallen by almost a third from its record in July. Still, crude remains at more than $100 a barrel and is 33 percent higher than a year ago. At the same time, a deepening crisis in global financial markets may dim consumers' willingness to spend in coming months.

``Whether it's consumption, investment or exports, all the engines of French growth are stopped, or even in reverse,'' said Marc Touati, chief economist at Global Equities in Paris, before the report.

Earlier this month, Finance Minister Christine Lagarde pared her prediction for 2008 economic growth to around 1 percent from a previous forecast of at least 1.7 percent. Those forecasts may prove optimistic as the worst U.S. housing slump since the Great Depression has pushed up the cost of credit globally and roiled financial markets, threatening to further pare global growth.

Growth Declines

The French economy shrank 0.3 percent in the second quarter, the first contractions in more than five years, a separate report confirmed today. Household spending fell 0.1 percent, while exports declined 1.7 percent, from an increase of 2.6 percent in the first three months. The European Commission predicted Sept. 10 that the economy will stall in the third quarter, barely skirting a recession.

``It's possible France's GDP will shrink in the third quarter; even zero growth would be good,'' Frederik Ducrozet, an economist at Credit Agricole SA in Paris, said on Bloomberg Television.

The gain in French confidence mirrored advances in Germany and Italy as the lower oil prices fueled optimism that record inflation rates would ease. Confidence among consumers in Germany, Europe's biggest economy, unexpectedly rose for the first time in five months, a report showed yesterday. Italian confidence advanced from a 15-year low in August.

Manufacturers were less optimistic. Confidence among French producers dropped to a five-year low in September, Insee said on Sept. 24, suggesting that the turmoil in markets fueled by the collapse of Lehman Brothers Holdings Inc. has overshadowed declines in oil and the dollar. Crude has fallen 27 percent decline since a July 11 record of $147.27 and the euro also declined from a peak against the dollar the same month.

French President Nicolas Sarkozy said in a speech on the economy yesterday that the turmoil in financial markets will be lasting and the fallout will hurt growth, employment and spending.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.