Boston, MA -- (SBWIRE) -- 07/28/2012 -- The overall picture remains weak for France, with leading and coincident economic indicators within the household sector in particular showing signs of extended softness. As such, we prefer to refrain from calls for a sustained recovery until we see start to see a more harmonious picture emerge. We remain comfortable in holding on to our current forecast for real GDP to contract by 0.2% over 2012.

Headline Industry Data (local currency)

- 2012 per capita food consumption = +0.3%; forecast to 2016 = +4.5%
- 2012 alcoholic drink sales = flat; forecast to 2016 = +2.9%
- 2012 soft drink sales = +1.3%; forecast to 2016 = +13.6%
- 2012 mass grocery retail sales = +1.6%; forecast to 2016 = +12.6%

Key Industry Trends And Developments

French Food Sector Grows in 2011 Despite Turbulence: The food trade body in France, ANIA, has recently reported that despite 'economic turbulence', 'extreme' climatic conditions and geopolitical unrest, the country's food industry reported a 6.8% increase in sales in 2011 to reach EUR157.2bn. The sector remains the largest employer in the country's manufacturing industry with 500,000 direct employees. However, the body has warned of short term 'turbulence' for the remainder of 2012 and 2013 for the food industry. As well as facing a 'steady decline' in household budget spend for food, ANIA also pointed to a 'continuing surge' in agricultural commodity prices, which increased by 31% in 2011.

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Carrefour Q1 Europe Sales Hit by Weak Non-Food Numbers: Carrefour continues to be hit hard by the non-food arm of its European hypermarket business, with year-on-year sales continuing to perform poorly into the first quarter. We have argued that 2012 is a hugely important year for the French retailer, the world's second largest by sales, as it needs to restore some lost confidence from investors, and in the process halt the slide in its share price. Although overall sales were more or less flat, Europe continues to paint a sour picture. Although food sales are largely flat, the non-food space which Carrefour devotes a lot of shelf space to is not doing well, which to a large extent reflects the broader macroeconomic temperature.

Key Risks To Outlook

Eurozone Debt Crisis: The greatest short-term risk to the French outlook is a credit event elsewhere in the eurozone. The possibility of a further intensification of the eurozone sovereign debt crisis and the potential need for state-led capital injections in the domestic banking sector would elevate risk aversion and could destabilise the economic recovery.

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