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French consumer morale the highest in five years

France may be depicted as all doom and gloom but the French are at a five-year high when it comes to consumer confidence, the country's statistics agency said on Tuesday, showing that households feel more optimistic about the country's economy.

Published: 28 April 2015 17:21 CEST

French consumer morale the highest in five years

Consumer confidence is on the rise in France. Photo: AFP

The INSEE national statistics office noted on Tuesday that French consumer confidence this month was the highest it has been since January, 2010.

The consumer confidence index- which measures the view taken by households of the economic situation – gained one point and reached 94 this month, up from 93 in March.

The indicator, which is particularly closely watched in France because household consumption is a key driver of growth in the economy, remained well below of its long-term average of 100 points.

The new figures show that French households feel more optimistic about their current and future saving capacities, with satisfaction about personal finances also on the rise.

There was also a 2-point increase in the number of households which considered it to be appropriate to make major purchases, marking a 16-point gain since September 2014, and leaving it as the highest level since October 2007.

The positive news will no doubt by welcomed by France's President Francois Hollande, who revealed on Monday that the country's unemployment level had climbed again, and is now sitting at 3.51 million, up 0.4 percent from February.

Indeed, French households are well aware of the unemployment problems, with the INSEE report noting a 15-point hike in the number of households fearing joblessness levels will rise, following a drop of 13 points last month.

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How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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