PARIS, March 26: Prices rose faster than wages in France in the last three months of 2004, official figures showed on Friday, pointing to an erosion of households’ purchasing power just as the government is trying to boost consumer demand. An index of base salaries rose 0.3 per cent in the fourth quarter of last year compared with the previous quarter while consumer prices excluding tobacco rose 0.5 per cent in the same period, the Labour Ministry figures showed. The report will make bleak reading for Prime Minister Jean-Pierre Raffarin’s conservative government, which has faced mass protests in recent weeks by workers worried about a perceived drop in their purchasing power.
Raffarin is also reeling from a rise in the jobless rate to 10.1 per cent and opposition to labour market reforms. The government fears voters could vent their discontent by opposing the European Union’s constitution in a May referendum.
The erosion of consumer purchasing power is the latest in a series of negative economic indicators from France, the euro zone’s second biggest economy after Germany.
This week, official figures showed French consumers cut their spending by an unexpectedly large 1.0 per cent in February, while statistics office INSEE said growth was set to slow in the first half of 2005, with unemployment staying around 10 per cent.
Seeking to boost consumers’ purchasing power, Finance Minister Thierry Breton last week unveiled tax incentives for companies to share some of their profits with their employees.
The government has also urged private sector firms to open wage negotiations, and has agreed to re-open pay talks with civil servants.
In a report entitled “Slow-paced recovery”, INSEE said on Thursday that French inflation was set to be running at an annual rate of 1.5 per cent in June 2005, compared with 2.1 per cent in December 2004.
