France and Germany helping employers to keep employees

[florida08]

French and German consumers are keeping up their spending even in the face of the severest recession to hit the Continent in half a century, data and surveys showed on Tuesday.

France reported consumer spending on manufactured goods rose by a bigger-than-expected 0.7 per month on month in April, while Germany’s GfK research organisation reported its “consumer climate” indicator was expected to hold steady in June for the fourth consecutive month....

The 16-country eurozone – of which Germany and France are the largest members – contracted faster than the US in the first quarter, with exporters faring particularly badly. But its consumers have been helped by government measures allowing companies to hoard, rather than shed labour, and encouraged consumers to spend – particularly on cars.

“Where the Anglo-Saxon economies are likely to see a sizable retrenchment in consumer spending this year, continental consumers will probably keep spending broadly stable,” wrote Elga Bartsch, European economist at Morgan Stanley, in a note.

A breakdown of first-quarter German gross domestic product on Tuesday confirmed unevenness of the downturn. German exports and investment were in free fall, dropping by 9.7 per cent and 7.9 per cent compared with the previous three months. But consumer spending rose by 0.5 per cent.

However Ms Bartsch argued that eurozone consumers would cut back spending next year as a result of steep rises in unemployment. The GfK added that German consumers had “yet to face a real test”.

In France, continued consumer resilience helps explain why the country has so far suffered less in the recession than some its neighbours. April’s rise in spending was largely driven by a surge in car sales, up 3.7 per cent, as consumers took advantage of government incentives to trade in old models for new, less polluting ones...

But the scale of the overall contraction in eurozone economic activity means governments will not be able to prevent a surge in jobless figures this year, economists fear. Eurozone industrial orders in March were almost 27 per cent lower than a year before.


http://www.ft.com/cms/s/0/26fe62d6-49fa-11de-8e7e-00144feabdc0.html?nclick_check=1