French February consumer spending dropped 2.0% m/m and 2.0% y/y, after rising 1.7% m/m and 1.8% y/y in January. Expectations had been for a decline of around 1.0% so data were much weaker than expected and confirm that Q1 GDP will look even worse than the fourth quarter of last year. Rising unemployment and uncertainty about the future outlook is weighing on spending, despite the fact that sharply lower inflation is boosting real deposable income for those still in work.
Meanwhile, French March business confidence remained steady at 68, unchanged from February. This was in line with expectations, but the forward looking business outlook indicator jumped to -70 from -76, which suggests that companies are slowly getting less pessimistic about the future outlook, which is good news. Together with marked improvements in the German ZEW and the Ifo expectations reading data indicates that confidence is starting to bottom out, which supports hopes for a stabilization in overall GDP growth towards the end of the year. Interestingly though, the reading for the own company production outlook improved only marginally - to -45 from -46 in the previous month.
Al Bawaba
