French Consumer Confidence Falls, Matching Record Low

By Francois de Beaupuy

Oct. 28 (Bloomberg) -- French consumer confidence dropped in October to match a record low on concern that the global economic slowdown will prompt companies from banks to carmakers to continue firing workers.

A gauge of consumer sentiment fell to minus 47 from minus 44 in September, the Paris-based national statistics office, Insee, said in a statement today. The reading matched the revised number for July, which was a record low, Insee said.

``Unemployment has returned to the top of French worries in the past two or three months,'' said Jean-Louis Mourier, an economist at Paris-based brokerage Aurel, in an interview with Bloomberg Television today.

The French economy is likely to already be in recession after shrinking 0.3 percent in the second quarter, the first contraction in more than five years, Insee has said. The global financial crisis is threatening to erode corporate profit and has pushed the country's benchmark CAC 40 stock index down almost 46 percent this year, further weighing on optimism.

European Slowdown

Europe's economy is on the brink of a recession, with the region's manufacturing and service industries contracting at a record pace in October and the Dow Jones Stoxx 600 index down 46 percent this year. German business confidence dropped to the lowest level in more than five years in October, a report showed yesterday. Confidence among Italian retailers in October slipped to the lowest in four months, another report said today.

French manufacturers expect to pare staff at a faster pace in the fourth quarter as orders continue to shrink, a quarterly Insee survey also showed today.

A slowdown in construction also threatens to fuel the decline in joblessness. French housing starts fell 8.1 percent in the third quarter from a year earlier, and new building permits dropped 23.3 percent in the same period, a separate government report showed today.

``We're going toward a drop of 15 percent to 20 percent'' in home sales in 2009, said Olivier Eluere, an economist at Credit Agricole, in a research note released yesterday. ``Prices might fall by 5 percent in 2008 and 10 percent in 2009.''

On Oct. 20, Paris-based homebuilder Kaufman & Broad SA said it will shed 166 jobs. Last month, Credit Agricole SA, France's third-largest bank, said it will eliminate about 500 jobs at its Calyon corporate and investment banking unit to rein in costs following three consecutive quarterly losses.

Rising Unemployment

French President Nicolas Sarkozy is due to present measures to support employment during a trip in northern France later today. The number of jobseekers in France rose by 41,300 in August, the most in more than 15 years.

Confidence among French manufacturers dropped this month to the lowest since December 1993, the last year when France was in recession, Insee said on Oct. 23, suggesting that the turmoil in markets fueled by the collapse of Lehman Brothers Holdings Inc. has overshadowed declines in oil and the euro.

On Oct. 24, Paris-based PSA Peugeot Citroen, Europe's second-biggest carmaker, cut its full-year earnings target and said production will be slashed by about 30 percent in the fourth quarter following a ``collapse'' in the global auto market.

Cutting Forecasts

Finance Minister Christine Lagarde last week said the government will probably need to reduce its growth forecast for next year, from a current prediction of 1 percent. She has pared her prediction for 2008 economic growth to around 1 percent from a previous forecast of at least 1.7 percent.

``The deterioration in economic conditions should trigger a significant rise in unemployment, and confidence will remain low, but the reversal of the oil-price shock should limit the slowdown in purchasing power,'' said Olivier Gasnier, an economist at Societe Generale in Paris, in a research note released yesterday. He expects the French economic growth to stall next year after expanding 0.9 percent this year.

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