February 28, 2014 / 9:33 AM / in 5 years

Lower car sales, heating bills weigh on French consumer spending

PARIS (Reuters) - Falling car sales and lower-than-usual energy consumption due to warm weather dragged French consumer spending sharply lower in January from the previous month, weighing on recovery in the consumer-dependent economy.

Data from the INSEE statistics office showed spending fell by 2.1 percent in the month and 0.5 percent year-on-year. It was the biggest month-on-month fall since March 2012.

With unemployment stuck at 11 percent, consumers reined in spending on durable goods after the holiday season, buying 7.7 percent fewer cars than in December as new tax penalties on non-environmentally friendly cars kicked in.

A rebound in clothing and footwear purchases, up 1.9 percent on the month due to aggressive sales, was not enough to offset the declines in other areas.

January’s data dampen hopes of a consumer-driven recovery in the first quarter of this year after strong spending figures over the last three months of 2013, piling pressure on President Francois Hollande to find new sources of growth.

“The likelihood of a slight decline in GDP in the beginning of the year appears to be reinforced,” Denis Ferrand, an economist at the COE-Rexecode think tank, said in a tweet.

A sharp fall in energy consumption, down 6.3 percent in January after a 1.3 percent drop in December, was also an important factor in the fall as temperatures remained unseasonably warm.

Spending on manufactured goods also dropped by 1.5 percent, weighing on a nascent recovery in Europe’s second-largest economy, which eked out growth of 0.3 percent in the fourth quarter of last year.

“This is clearly a very bad start for Q1, but this is no surprise since it is driven by fiscal factors,” Dominique Barbet, an economist at BNP Paribas, said in a research note. “The underlying trend should remain positive though.”

Reporting By Nicholas Vinocur and Jean-Baptiste Vey; editing by Mark John

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