French Consumer Confidence Unexpectedly Rises on Energy Prices

By [bn:PRSN=1] Sandrine Rastello []

Nov. 26 (Bloomberg) -- French consumer confidence unexpectedly increased in November as declining energy prices slowed inflation and left households with more money to spend.

A gauge of consumer sentiment in the euro region’s second- largest economy rose to minus 43 from a record-low minus 46 in October, a record low, the Paris-based national statistics office, Insee, said in a statement today. Economists expected a reading of minus 49, according to the median of 21 forecasts in a Bloomberg News survey.

Consumer spending helped the French economy dodge a recession in the third quarter, as the price of oil dropped almost two thirds from a July peak of $147. At the same time, the spreading global financial crisis led to French growth almost stalling in the three months through September, causing a surge in jobless claims.

“For the next few months I see the positive effects stemming from re-gained purchasing power outweighing the negative impact from an ailing labor market,” said Sebastian Wanke, an economist at Deka Bank in Frankfurt. “Then rising unemployment will dominate spending patterns.”

The drop in energy prices also contributed to German consumer optimism unexpectedly rising for a third month, a report yesterday on optimism for December showed.

Job Cuts

Executives were more pessimistic. French business confidence fell to the lowest in more than 15 years this month, Insee reported yesterday. Confidence among German executives slumped to a 16-year low, a Nov. 24 report showed.

Facing a slump in demand, carmakers PSA Peugeot Citroen and Renault SA have announced plans to trim production and cut jobs, prompting President Nicolas Sarkozy yesterday to announce a “massive” stimulus package for the automobile industry as well as more spending on construction. He saw he will give details of the plan within 10 days.

“Because of the economic crisis, everywhere in the world there will be more people unemployed and less growth,” Sarkozy said in Valenciennes, Northern France. He said the day before he wouldn’t “let the car industry down.”

The European Union is also due to unveil today a region- wide stimulus plan to try to limit the fallout from the global crisis, which has sent the 15-coutry euro region into a recession.

French gross domestic product will contract by 0.4 percent next year after growing 0.9 percent this year, the Paris-based Organization for Economic Cooperation and Development predicted yesterday. Employment will shrink by 0.6 percent in 2009, pushing the jobless rate to 8.2 percent from an average of 7.3 percent this year, the research center said.

Announcements of job cuts have multiplied across the country. Last week Amora Maille, a unit of Unilever NV, said it would close its oldest factory of spicy Dijon mustard, resulting in the loss of 265 factory and research posts. Non-farm payrolls in France fell in the second quarter for the first time in four years.

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