(adds budget minister's comment in paragraphs 4,5)
By Paul Carrel
PARIS, Oct 22 (Reuters) - French consumer spending showed its biggest monthly increase in over four years in September, rising 3.4 percent after a sharp drop in August to quell the threat of recession in the euro zone's second largest economy.
National statistics office INSEE said on Wednesday September consumer spending rose 3.9 percent year-on-year.
The September month-on-month jump -- the biggest since July 1999 -- was led by 4.4 percent increases in spending on cars and on textiles and leather goods.
French Budget Minister Alain Lambert seized on the strong consumption figures as a sign of better things to come.
"France is on its way to recovery. Consumption is recovering. The very good figures for September confirm this," Lambert told BFM radio.
The rebound in spending was above market expectations, with economists polled by Reuters having given a mid-range forecast for a 1.6 percent month-on-month rise.
"It's a pleasant surprise," said Emmanuel Ferry, economist at brokerage Exane said.
"We had positive consumption in the third quarter and that should avoid GDP being down again (after a contraction in the second quarter)," he added. "We escape recession, in the sense of two negative quarters of growth."
After contracting by 0.3 percent in the second quarter, France needs growth for the July-September period to stave off recession under this definition.
NO RECESSION
"The September figure shows that consumption over the third quarter will be positive and there should not be a recession," said Laure Maillard, economist at CDC Ixis.
Monthly data on household spending, traditionally the main driver of growth in France, has seen ups and downs over the last year. INSEE revised its August figure to show a 2.9 percent drop in spending. It had previously reported a 2.7 percent fall.
The Bank of France last week said its latest business survey produced a forecast for 2003 GDP growth of 0.2 percent, including 0.3 percent in the third quarter and 0.5 percent in the fourth.
Citing the central bank report, Finance Minister Francis Mer said last week that the economy was getting back on to the path of "reasonable growth". French companies remain cautious about the near-term outlook, however.
Carmaker PSA Peugeot Citroen warned on profits for the second time in three months on Monday, and car part maker Valeo posted a dip in third-quarter profit. The impact of a strong euro played a role in both firms' troubles.
Companies have sought to cut costs by shedding workers, which has dampened consumer morale and helped push up France's unemployment rate up to 9.6 percent. Advertising agency Havas last month said it planned to axe 1,600 jobs -- the latest in a series of such cuts by leading French firms. (Additional reporting by Glaieul Mamaghani)