French consumer confidence hits high

Laurent Fabius: economic growth will hit 3% this year

Consumer confidence in France has hit all-time highs, apparently defying fears that the slowdown in US growth is sapping Europe's economic vitality.

Optimism among French households about their future prosperity, as measured by an official index, rose to a record level of plus seven in January.

The figure compares to December's level of 3, which was itself the record high since Insee, France's official statistics office, began compiling its consumer confidence index in 1985.

Economists said the report provided evidence that Europe would be able to survive relatively unscathed from a slowdown in the US economy, the world's biggest, where growth has slumped to its lowest level for five years.

Eurozone leader

The "excellent" consumer confidence figure "reinforces the scenario that in Europe, and France in particular, domestic demand will help protect the economy from the shock coming from the US", said Virginie Sue, economist at Fortis Securities France.

France does seem to be in a much better position than Germany or Italy... it is in the best position of the euroland economies

Nick Stamenkovic, Nomura London

Nick Stamenkovic, senior bond analyst at Nomura London, said: "It shows that the French economy is probably the most robust in the core euroland zone."

The health of France's economy, which is continuing to head the growth table among major EU countries, is being seen as an increasingly important indicator of European prosperity as a whole.

While German economic recovery is still struggling, and UK growth has slumped to a two-year low, the French economy grew by an estimated 3.2% last year, and, according to finance minister Laurent Fabius, is to expand by 3% in 2001.

The country also boasted, at 1.6%, the lowest inflation among eurozone countries last year, with the number of job seekers falling by more than 450,000 to 2.17 million.

Mr Stamenkovic said: "France does seem to be in a much better position than Germany or Italy... (it) is in the best position of the euroland economies. But there will be some knock-on effect from the US slowdown."

Key data

Consumer confidence information worldwide is being viewed with increasing importance by economists, as it reveals the extent to which stock market falls have affected household spending.

Lower household expenditure represents a significant threat to economic growth.

"Consumer spending is this year's theme," said Emmanuel Ferry, economist at Exane.

Tuesday's data revealed that French consumers are becoming ever more likely to make a major purchase, such as buy a house or car, and are more confident about the outlook for their personal finances than at any time in the last year.