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Economy in Brief

French Household Confidence Remains in Steep Fall
by Robert Brusca May 28, 2008

French household confidence is not having a vintage year and its not due to the weather. The household survey is at its lowest level since 1990. Living standards for the next 12-months are assessed as likely to be the worst since 1990. The past 12-months are assessed as having been the worst since 1990. That’s a bad start for the survey right here. But there’s more...

The unemployment expectation is now mid-range at a +18 value. Price developments in the last 12 months are assessed as the worst since 1990. Mercifully, in the period ahead, price developments are scored as in roughly the bottom quartile of their range. The ECB may take some (minor) solace from that.

The favorability of the environment for savings gets a mid-range 47th percentile response but the ability to save rating for the next 12-months is a bottom 10 percentile score. Similarly, the favorability of the environment for spending is in the bottom fifth of its range. The current financial situation is in the bottom third of its range but the past 12-months and future 12-months are assessed as the worst since 1990. I think there is pattern developing here...

French consumers were at first very happy to have Mr Sarkozy in office and confidence ran up even in the face of some clear problems in the aftermath of his election to office. But since then some internal social issues emerged, the euro continued to move higher, and food and energy prices have shot up across Europe as the European economy has slowed down.

Consumers are feeling the pinch in France where various demonstrations have been petitioning for relief from high fuel prices. Sarkozy has requested that the EMU’s VAT tax on fuel be capped to help contain price pressures from rising faster at the pump as energy prices spurt. While that might help somewhat France’s problems run deeper than that. Most of the EMU nations seem to be sharing in this sort of pain although Germany, so far has, expressed the smallest level of discomfort, but even there discomfort seems to be growing.

INSEE Household Monthly Survey
          Since Jan 1990
  May-08 Apr-08 Mar-08 Feb-08 Percentile Rank
Household Confidence -41 -38 -37 -36 0.0 221
Living Standards
past 12 Mos -74 -70 -71 -69 0.0 221
Next 12-Mos -49 -44 -41 -42 0.0 221
Unemployment: Next 12 18 4 10 12 50.0 140
Price Developments
Past 12Mo 66 58 61 43 100.0 1
Next 12-Mos -36 -36 -41 -25 26.4 113
Savings
Favorable to save 21 24 25 23 47.2 130
Ability to save Next 12 -20 -13 -17 -14 10.3 219
Spending
Favorable for major purchase -31 -29 -29 -27 19.0 214
Financial Situation
Current 10 12 12 12 33.3 138
Past 12 MOs -32 -30 -31 -27 0.0 221
Next 12-Mos -18 -16 -14 -14 0.0 221
  Number of observations in the period 221  
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