PARIS — French consumer confidence has hit an all-time low, the latest survey showed on Thursday, just as the state auditor warned that a likely economic contraction would knock the government off course on this year's deficit reduction target.
The June consumer confidence index fell to the lowest level since records began in 1972 and households are more pessimistic than ever about their future living standards, data from the national INSEE statistics institute showed.
The trend suggests that Europe's second-biggest economy, hit by lagging trade competitiveness and caught in a shallow recession, will not be able to count on its traditional driver of consumer spending to rebound.
The Cour des Comptes, a quasi-judicial body that oversees state accounts, warned in an annual review that with the public spending deficit heading for near 4 percent of economic output this year, missing a 3.7 percent official target, structural reforms must be implemented immediately to cut spending.
"Large doubts weigh on the flow of corporate and sales tax revenues," the auditor said in its 250-page review.
The body's president, Didier Migaud, told lawmakers as he presented the document that "reforms enabling a reduction in the weight of public spending seem more necessary than ever."
French GDP shrank 0.2 percent quarter-on-quarter in the first three months of the year, INSEE data confirmed this week. The government sees full-year growth at 0.1 percent, but INSEE and the European Commission both forecast a 0.1 percent drop.
The June consumer confidence index came in at 78, three points below analyst expectations of 81 and far below a long-term average of 100, data from statistics office INSEE showed.
The view by French households on how their living standards would evolve also came in at the lowest in over four decades, while more people said they felt now was the right time to save and fewer planned important purchases.
The gloom is being driven by record-high jobless claims and growing doubts that President Francois Hollande can make good on his promise to reverse the unemployment trend by the end of the year.
Adding to the gloom, weeks of cold and rainy weather have left retailers with huge stocks of unsold summer clothes, forcing them to offer huge discounts of up to 80 percent as sales kicked off this week, although even rock-bottom prices had yet to make an impact, store owners complained.
"It's really terrible. Sales are really low, we've never seen such a drop," said Celeste Touboul, who manages two clothes shops in central Paris with her husband.
For the first day of sales on Wednesday, they met the very low target they had set themselves, she said, with turnover 50 percent down on more normal years.
"Don't even talk to me about the weather, it killed us even more, the season is ruined," Touboul said in her shop of colorful dresses, tops, and bags amid big "Sales" signs.
INSEE said last week that with subdued consumer demand weighing, growth would be too weak this year for the economy to start creating new jobs. It also forecast that the unemployment rate would rise to 11.1 percent by year-end, up from 10.8 percent today and just shy of a 1997 record of 11.2 percent.
The statistics office will publish May consumer spending data on Friday. French consumer spending fell last year for the first time in 19 years.
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