World Economy

More Bad News for France

More Bad News for FranceMore Bad News for France

France’s run of bad economic news continues. Despite a much worse than expected reading, there was little sign that the Nov. 13 attacks by Islamic State gunmen and suicide bombers in Paris had put off consumers making purchases.

INSEE statistics agency said consumer spending dropped 1.1% last month from October, confounding the average of economists’ expectations for an increase of 0.1%, Reuters reported.

The decline was the steepest since January 2014 and exceeded by a wide margin even the lowest forecast–for a drop of 0.5%–in a Reuters poll of nine economists.

INSEE put the decrease down to a 5.6% plunge in energy consumption and a drop of 4.7% in new clothing purchases with temperatures unusually high for November.

Apart from those two items, which together make up 28% of overall consumption, spending was largely stable or increased in November.

The eurozone’s second-biggest economy grew 0.3% in the third quarter largely because of household spending increasing at the same rate, INSEE said in a separate GDP report on Wednesday, confirming initial estimates.

Falling energy prices helped boost consumers’ purchasing power by 0.9% though the data suggested households squirreled away some of the gains, with the savings rate rising to 15.5%, the highest since the second quarter of 2012.

INSEE said low energy prices also benefitted corporate profit margins, which rose to 31.2%, the highest level since early 2011, though gains were kept in check by higher wages amid stagnating productivity in the quarter.

INSEE forecast last week that the economy would eke out 0.2% growth in the final quarter of the year, estimating that the impact of the Paris attacks would be brief.

The drop in spending was not unexpected. Markit’s retail PMI–which surveys sales of 300 retailers–dropped to 47.8 in November, down from 51.9 in the previous month. Anything below 50 signals contraction and the November Markit figure was the sharpest retail decline in seven months.

But none of that will likely console Francois Hollande. The fall in consumer spending is the latest in a string of poor data that France has suffered in recent weeks, including the highest unemployment rate for 20 years and service sector growth missing forecasts.

Meanwhile, France’s public debt dropped in the third quarter of the year as local authorities reimbursed loans to the central state.

France’s public debt fell by €2.2 billion to €2.10 trillion on Sept. 30 from three months earlier, INSEE said. The debt load represented 96.9% of gross domestic product, compared with 97.6% three months before.