Wednesday, February 27, 2013

French consumer recession is likely driven by job losses

Recent retail numbers from France are showing an ongoing consumer recession in spite of signs of improvement in confidence elsewhere in the EU. In fact the EU economic sentiment numbers today beat expectations to the upside -  nothing to write home about, but there are signs of stabilization (for now). French Retail PMI on the other hand shows highly stressed consumers generating the sharpest fall in retail sales in six months. French retail PMI materially dragged down the Eurozone's overall PMI.
Markit: - The French retail sector was caught in a deepening downturn during February. Sales fell sharply on both a monthly and annual basis, while there was a survey-record shortfall versus previously set plans. Retailers’ gross margins continued to be squeezed by a combination of higher purchasing costs and strong competitive pressures.
France Retail PMI® (source: Markit)

Job losses in France are likely the culprit, as French jobless claims hit a 15-year high last month.
Reuters: - The number of people out of work in France shot up again in January after a smaller rise in December, piling new pressure on Socialist President Francois Hollande who has made tackling joblessness his top priority.

The number of jobseekers in mainland France jumped by 43,900 or 1.4 percent, signalling a return to the rapid pace of increase seen over 19 straight months to December - although half of the rise was due to a change in methodology in January.
Source: Deutsche Bank

Until job losses are under control, it is hard to imagine consumer sentiment and spending improving. And as we've seen in the US, the time period from job market improvements to pickup in consumer spending can be fairly long.
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