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Drop in cigarette sales drags down spending

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14:04 CET+01:00
French households cut back slightly on their consumption in October but mainly in response to a rise in cigarette prices, official data showed on Friday.

Consumption, a main driver of growth in the French economy, slipped by 0.2 percent in October from the September level.

The INSEE statistics institute, which published the data, also revised down data for September to show stable consumption instead of a rise of 0.1 percent from the level for August.

INSEE said that in October, a rise in purchases of durable goods had not compensated for a sharp fall in spending on cigarettes after taxes were hiked on tobacco products.

At BNP Paribas bank, economists commented: "The fall is limited and is less than expected and the details are rather reassuring given the economic situation."

At Société Générale bank, chief economist Michel Martinez said that the outcome was in line with government thinking, to the extent that the effect of budget tightening was mainly reducing the rate at which people saved and so would have a moderate effect on consumption.
 
But this was just an initial sign, and one had to be cautious about the consequences of the budget action, he said.

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