Costly living could kill Europe's consumer revival

By Brian Love, European Economics Correspondent

PARIS (Reuters) - After a few years of brisk growth and job creation, Europeans were supposed to feel more secure and start to spend more, reviving consumer demand in the region and reducing its economic dependence on exports.

Nice theory -- shame about the surge in the cost of fuel, food and other things people buy before they see what is left to save or spend on life's luxuries, their discretionary budget.

A vendor at Paris's Bastille market provided a striking example of one luxury moving further out of reach of shoppers a few weeks ago when he raised the price for specialty Bresse chickens by 25 percent, to 20 euros or roughly 15 pounds each.

But apart from the scale of the rise, what the vendor did is no different from what companies are doing across Europe with necessities and luxuries alike -- making consumers pay the bill for soaring raw materials costs, in turn caused by the rising price of industrial and agricultural commodities worldwide.

Companies such as Nestle and Unilever, whose branded produce goes into the kitchens, bathrooms and cleaning-cupboards of most homes in Europe, raised prices last year to offset surges in raw material costs, and the same tactics apply for the rest of this year, according to recent declarations from the firms.

How long they can avoid taking some of the hit themselves at the profit-line is anybody's guess, although Nestle (NESN.VX: Quote, Profile, Research) hopes the pressure will start to ease later this year. So do politicians although some fear wage demands might spiral out of control and further fuel inflation, as happened in the 1970s.

Belgian supermarket group Delhaize (DELB.BR: Quote, Profile, Research) says it is beefing up its offer of own-label goods to cater to budget-conscious customers as competition intensifies with no-frills hard-discounters.

Carrefour (CARR.PA: Quote, Profile, Research), the world's second-biggest hypermarket group by stock market value after Wal-Mart, says many of the price rises it sees are for things other than the foodstuffs that tend to dominate the headlines.