October consumer spending down 0.7%, consensus forecast -0.1%; jobless total rose most in over two years to new record

Reuters
Paris

French consumer spending fell the most in seven months in October and the jobless total surged to a new record, signs that a recovery in the eurozone’s second biggest economy was struggling to gain momentum even before attacks in Paris this month.
The INSEE stats agency said yesterday consumer spending fell 0.7% in October from September, the weakest reading since March and worse than even the lowest forecast of 0.6% in a Reuters poll of economists.
However, much of the decline was due to a 3.4% drop in new car sales after a spike the previous month, while clothes and petrol purchases also pulled back amid warmer than usual weather for the season.
Adding to the gloomy picture, the jobless total jumped by 42,000 in October to 3.58mn amid increased layoffs and terminations of fixed-term contracts, Labour Ministry data showed late on Thursday.
The data suggest that a gradual recovery underway in France was on a shaky footing even before the November 13 shootings and suicide bombings in Paris by militant Islamists that killed 130 people and shocked the nation. “It is likely that household consumption may weaken in the fourth quarter after the good performance recorded in the third quarter, although widespread sales promotions across the country may help mitigate the knock-on effect of the attacks on spending,” Unicredit economist Tullia Bucco said in a research note.
“Looking ahead, improved fundamentals support a prompt re-acceleration in consumption in the early months of next year assuming that the terrorist threat subsides, without having any lasting effect on consumer behaviour,” she added.
President Francois Hollande’s government is hoping that the economy can achieve growth of at least 1.5% next year, which is considered to be the minimum necessary to get unemployment falling.
Economy Minister Emmanuel Macron said this week that tourism in Paris was starting to recover after hotel bookings plummeted in the wake of the attacks.
Economists say that the sector, which generates more than seven% of economic output in France, the world’s top tourist destination, is one of the most vulnerable to any economic fallout from the attacks.
In one positive note, Housing Ministry data released yesterday showed that housing starts rose 0.3% in the three months through October, as the home construction sector pulls out of a deep slump which had been weighing on economic growth.