France: Disturbing drop in consumer confidence – BNP Paribas

Hélène Baudchon, Research Analyst at BNP Paribas, points out that the French consumer confidence has dropped off sharply in November, reflecting the households concerns regarding their purchasing power.

Key Quotes

“The decline in confidence was surprisingly strong though, down 3 points, which is a lot for this indicator. The plunge is due to the sharp decline in household assessments of the opportunity to make big-ticket purchases as well as in their sentiment about the standard-of-living in France and unemployment prospects.”

“The sharp increase in household fears about unemployment is disturbing because it is not in line with the majority of other labour market indicators, which tend to be positive. They signal a situation that continues to improve, although not in a clear-cut way. This might explain why this improvement is not supporting more household confidence.”

“Yet this less negative survey item does not minimise the bad news of the overall results and their determinants. Besides, November’s sharp drop in consumer confidence was not an isolated event either: it is the continuation of a downtrend that began in late 2017. The consumer confidence index has fallen a cumulative 13 points to 92, its lowest level since early 2015 and well below its long-term average of 100.”

“Lastly, the problematic disconnect between household confidence and consumption has narrowed. Unfortunately, the gap was closed through a decline in confidence rather than higher consumption. None of this bodes well for fourth-quarter growth.”