French shoppers cut back on spending in August, data showed today, as high oil and food prices combined with stagnant wages left them feeling out of pocket.
Spending on manufactured goods fell 0.3 per cent in August pulled down by falling sales of cars and clothes, the national statistics office INSEE said. The number was far worse than the 0.3 per cent rise expected by economists in a Reuters poll.
Spending in July rose a surprise 0.4 per cent, beating expectations for a flat reading.
"It could have been worse but the outlook is not very good. We're looking at six very bleak months for the French economy," said Alexander Law, economist at Xerfi.
The French economy has relied heavily on household spending. President Nicolas Sarkozy has repeatedly promised to put money back in French pockets.
He will unveil his 2009 budget on Friday but economists say falling tax receipts and a growing deficit leave him little room to announce steps to help consumers.
Economists expect there will be worse to come as the international financial crisis weighs on confidence. But they say French households have a low level of debt compared to other Europeans so this may limit the impact.
Reuters