By Estelle Shirbon
PARIS, May 27 (Reuters) - French consumer confidence and business morale improved slightly in May, data showed on Wednesday, but record high fears of unemployment and low industry order books kept a lid on optimism.
Consumer confidence rose to -40 in May from an unrevised -41 in April, in line with expectations, data from national statistics institute INSEE showed.
However, the index of future unemployment expectations rose to 88 in May from 83 in April, hitting a record since the series began in January 1987.
"That's a problem. It is a cap on the improvement of the overall index and especially on chances of consumption patterns improving," said Jean-Louis Mourier, economist at Aurel BGC.
The spike in fears of joblessness is not surprising in light of an almost daily flow of headlines announcing mass layoffs.
In the latest blow, unions at the French unit of tyre maker
Goodyear
The INSEE survey showed consumer expectations of inflation dropped to their lowest point since September 2004. That index dropped to -55 in May from -53 the previous month.
"This is an interesting development in survey data," said Silvio Peruzzo, economist at RBS.
"Consumers' inflation expectations are trending lower whereas other data suggests investors are expecting inflation to rise, so there is this dichotomy between short-term and long-term inflation expectations," he said.
INSEE also published business morale data for May that showed an improvement in the indicator to 72 from an unrevised 71 in April. Economists polled by Reuters had expected the May figure to come in slightly higher, at 73.
The measure of stocks levels in industry dropped to 18 from 21 in April, and was back down at its lowest level since September of last year.
"That's a positive element as it suggests that the very strong destocking that we saw in late 2008 and in the first quarter of 2009 is almost enough and from now on destocking will be less massive," said Mourier.
However, order books remained stuck at very low levels. That index dropped to -70 in May from -69 in April. There was no reversal of the downward trend that has seen it tumble from -25 in September.
"Stocks have reached a bottom, but demand is in the doldrums. Domestic and foreign order books are empty, France is suffering from the situation of its neighbours, especially Spain and Germany," said Alexander Law, economist at Xerfi.
"Production expectations are holding up but there will only be a technical recovery, due to destocking expectations but not due to higher demand," he said.
The two surveys come a day after French consumer consumption data for April showed resilience, with households spending more than expected on manufactured goods.
- For a full table of consumer confidence data, double click on [ID:nPAB004808]
- For a full table of business morale data, double click on [ID:nPAB004809] (Additional reporting by Sophie Hardach, Veronique Tison and Michel Rose, editing by Mike Peacock)