French Consumers' 2004 Spending on Manufactured Goods Strongest in 5 Years

French consumer spending stabilized in December after a bounce in November. The November gain contributed to a surge in the 2004 overall result to 4.4% growth over 2003, making it the strongest yearly performance since 1999.

Durable goods, particularly consumer electronics, led the spending surge. Although these outlays fell in December by 0.3%, they still were 11.1% above December 2003 and expanded for 2004 as a whole by 8.5% over 2003. Furniture was the other durable item contributing to the gain; it rose 3.5% in the year, the largest since 1989 and the second largest in the 20-year history of these data. Among nondurable goods, clothing and other textile outlays were up 10.3% in December from a year ago; their yearly total was only 1.6% higher than in 2003, but this was also a relatively strong performance for this particular item. Other nondurable goods were up 2.2%, better than the two prior years, but not especially vigorous for this spending.

The gain in consumer spending over 2004 isn't easy to explain. Employment in France declined modestly through the third quarter and labor compensation had a tepid rise. Slower inflation might have helped, as indicated in the graph, which shows year-to-year percent changes in consumption of manufactured goods and the CPI for those items. The correlation is rough, but at -52%, this might suggest that the virtual absence of inflation in manufactured goods has helped support consumer demand for them.