By Sandrine Rastello
Nov. 22 (Bloomberg) --
French consumer spending on manufactured goods rose in October after unemployment fell to a five-year low.
Such spending, which accounts for about 15 percent of the economy, increased 0.9 percent from September, when it dropped a revised 2.5 percent, Insee, the Paris-based national statistics office, reported today. Economists expected a 1 percent gain, according to the median of 27 estimates in a Bloomberg survey.
Consumers have sustained the economy's expansion as investment slowed and exports fell, partly because unemployment dropped to 8.8 percent in September, the lowest since October 2001 and oil prices slid.
Even after recording no growth in the three months through September, Europe's third-largest economy this year is headed for the fastest expansion since 2000.
``Consumption should stay strong through Christmas,'' said Paul Guest, chief European economist at Moody's Economy.com, a London-based consultancy. ``Consumer confidence has gone up from last spring, unemployment is down, oil prices have gone down. There's a little more money to spend there.''
The spending increase was led by a 1.1 percent gain in car sales and a 1.5 percent advance in textile and leather goods. French car and light-truck sales jumped 12 percent last month, the national carmakers association said.
The September spending figure was revised from a decline of 2.7 percent.
Tax Cuts
Falling oil prices may be helping consumers, who also will see the first effects of an income-tax reduction in the first quarter. Crude has declined about 25 percent from the record $78.40 a barrel on July 14. Crude oil for January delivery traded at about $60 today.
Prime Minister Dominique de Villepin's government geared its 2007 budget toward consumer spending before presidential elections. The plan includes almost 6 billion euros ($7.7 billion) in tax cuts, rebates and measures to buoy spending.
The consumer may continue to underpin growth in the coming quarters, said Nicolas Sobczak, a Paris-based economist at Goldman Sachs Group Inc.
``The situation could turn more problematic for France at the end of 2007,'' Sobczak said. `` By that time the support from the housing market will have disappeared.''
After rising more than 10 percent a year since 1999 and more than 15 percent in the past two years, French house prices are likely to flatten out by the end of next year, he said. The strength of the market has helped push spending on home- equipment goods, which last month surged 19 percent from a year earlier.
To contact the reporter responsible for this story: Sandrine Rastello in Paris
srastello@bloomberg.net