It Seems As If French Consumers Have Reached Their Optimism Peak

French consumer confidence stabilized in October at 104.1, after getting close to its post-2008 peak in September. In our view, GDP figures should, therefore, show a solid contribution of private consumption.

Source: Shutterstock

In France, the robust 2019 catch-up in consumer confidence ended in October.

After increasing for nine consecutive months reaching 104.2 in September, close to its post-2008 peak, it stabilized in October at 104.1. Fears of unemployment have strongly receded in recent months which – together with the fiscal boost - helped consumers to restore faith in their future financial situation. Since the summer, they have been more confident in their future ability to save. We think this signals the end of a particularly high saving anxiety era which saw households cut spending during the “yellow vest” crisis earlier this year. The October confidence survey also showed improvements in their important purchase intentions.

The recent unemployment figures also continue to feed optimism. The unemployed population fell by 55,900 in seasonally adjusted terms in 3Q19. In this respect, the third quarter was the best since 2007. However, if strikes on the back of pension reform were to increase, they could shorten what remains of positive momentum before the renewed slowdown expected for 2020.

We therefore clearly see a case for better consumer spending figures in the near term, which should probably begin to come through in tomorrow’s 3Q19 GDP data.

This confirms our view that private consumption should look stronger in the second half of 2019 (after only 0.2% QoQ in the second quarter and 0.4% in the first).

However, the effect of the mediocre first semester on private consumption growth will be significant and is unlikely that the current improvement will bring consumption growth above 1.2% in 2019, after only 0.9% in 2018.