French consumption: the winter of discontent



Household manufacturing consumption (Oct)
Actual: -0.4%mom, +3.0%yoy
UBS Warburg: +0.2%mom, +4.3%yoy
Consensus: -0.2%mom, +3.9% yoy
Previous: -0.1%mom, +4.3%yoy



October consumption data are clearly disappointing, not only because 
consumption contracted but also because previous numbers were revised 
significantly down. Moreover, taking out the large positive impact from car 
consumption, numbers look even weaker. We think the bad performance of the 
labour market is eventually taking a toll. We expect the fourth quarter to 
remain very weak in terms of consumption.



* The monthly decline in consumption is quite severe, but it is important 
also to note that September growth was revised to -0.1% while the original 
number was +0.2%. 


* Car consumption is in line with preliminary information (+0.8% mom, 
+11.1%yoy) but this is balanced by a very weak retail sector (-0.5%mom, 
+0.9%yoy). Hence the underlying trend, without the car effect, is even 
weaker than what is suggested by headline numbers.


* Numbers in Q3 were buttressed by the employment premium which was paid to 
low income people. But the underlying trend, with the sharp deterioration 
of the labour market, is a negative for consumption. We remain very 
pessimistic about the short term prospects of the labour market. Hence we 
believe the consensus is still too high.





St?phane D?o
Economic Research
UBS Warburg
Tel : +33 1 48 88 30 36
Fax : +33 1 47 63 48 08
Mob : +33 6 76 85 33 18
Stephane.deo@ubsw.com