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Friday, 1 June, 2001, 09:15 GMT 10:15 UK
French shoppers lose their nerve
French butcher
Rising prices and unemployment scare off consumers
French consumer confidence plunged into negative territory in May for the first time in six months, the statistics office INSEE said on Friday.


Many households believe their personal financial situation will deteriorate over the coming months

INSEE
Confidence registered minus seven on the index after being at zero in April, and showed its fourth consecutive monthly fall.

It is also at its lowest point since last September when discontent over soaring fuel prices pushed the figure down to minus seven.

The index added to growing evidence that the eurozone's second largest economy was not immune to the impact of the US economic slowdown.

Over spending

Consumers in France, as in the US and the UK, have until now cushioned the economy from a sharp slowdown.

Moulinex workers protesting about job cuts
Job losses at companies such as Moulinex cause consumers concern
But with rising inflation and a small rise in the number of unemployed in April, consumers do not feel as free to spend anymore.

"The reason is purchasing power and employment have deteriorated recently with quite a clear rise in consumer prices in the second quarter and the announcement of various lay-off plans," said Jean-Marc Lucas, economist at BNP Paribas bank.

INSEE said consumers were less optimistic overall in May, but the sharpest fall had been in prospects for their standard of living.

Quality of life

"There are also many more households who believe their personal financial situation will deteriorate over the coming months," the institute said in a statement.

There was also a sharp deterioration in households' views of employment prospects.

But INSEE noted that the consumer confidence index remained high by historical standards. It recorded a positive number for the first time in April 2000 and has since yo-yoed in and out of negative territory.

"Despite this strong drop, it is too early to talk about a downturn in confidence. This is quite a volatile index and the elements which make it up weigh a little less in actual purchasing and consumption decisions," said Mr Lucas.

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See also:

31 May 01 | Business
Euro stays at six-month low
25 May 01 | Business
Intervention threat bolsters euro
22 May 01 | Business
German business confidence slumps
27 Apr 01 | Business
French economy outshines Germany
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