Pessimistic, the French are spending sparingly.

Food, household appliances, DIY, cars, mobile phones, etc. Faced with successive governments since mid-2024, households are curbing their spending. Yet, this spending accounts for approximately half of the wealth produced annually in France.

"Consumption has been disappointing for several quarters," growing less rapidly than purchasing power, notes Dorian Roucher, head of the economic forecasting department at the National Institute of Statistics (Insee), interviewed by AFP.

Goods are more affected than services, he notes, citing food where the cumulative decline is "around 8% since 2022," when prices soared after the Russian invasion of Ukraine. "This is unprecedented since we started compiling statistics at INSEE."

The French are consuming less fresh fruit, vegetables, and meat, which they consider more expensive, and more eggs, pasta, and ready-made meals. Textile purchases are also suffering, as is the automotive sector due to a wait-and-see attitude towards technological advancements.

While this phenomenon has been observed since the health crisis - shops and restaurants were closed - then the inflationary crisis, the dissolution of the National Assembly in June 2024 caused a new upheaval.

Record savings rate

"The French are feeling down. Compared to their neighbors, they are much more pessimistic," emphasizes Dorian Roucher.

However, this perception is disconnected from reality (rising wages, resilience of the labor market, etc.): "it's psychological," notes Maxime Darmet, economist at Allianz Trade.

In its September economic outlook, INSEE noted that "household confidence, which had been trending upward until the summer of 2024, has been declining almost continuously since then."

"Their purchasing power gains have been greater than elsewhere in Europe," due to lower inflation, expected to average 1% annually in 2025, "but their purchases are less dynamic and the savings rate is hitting a new record high every quarter."

While heated budget debates roil the Assembly, the outlook remains uncertain. This climate of uncertainty may have been exacerbated by international trade and geopolitical tensions.

Household consumption is expected to slow to +0,5% this year, after +1,0% in 2024 (compared to +0,8% and +2,5% for purchasing power), according to the statistical institute.

As a result, the savings rate – the portion of income not consumed – would increase further, unlike in other European countries. It would reach 18,5% for the year (after 18,2%), a 45-year high excluding the health crisis, whereas it had remained stable at around 15% previously.

According to Dorian Roucher, half of the increase in the savings rate was driven by the rise in investment income (life insurance, savings accounts, etc.) against a backdrop of rising interest rates.

Social benefits were also indexed to high inflation. Thus, in 2024, two-thirds of the increase in the savings rate was fueled by retirees, who saved their increased pensions.

No "catch-up"

For the other half, there is "a kind of specific pessimism in France since the summer of 2024, which continues to worsen", linked to "an uncertainty effect", the statistician explains.

This frugality stifles growth, depriving it in particular of additional revenue such as VAT.

In the third quarter, French growth surprised positively (+0,5%), but household consumption increased more modestly, by 0,1%, the same as in the second quarter. No significant rebound is expected before the end of the year. Household investment declined by 0,4% during the period, particularly in new housing.

"That ingredient is missing for growth to be established on solid foundations," says Maxime Darmet.

Stéphane Colliac, an economist at BNP Paribas, does not believe in a return to pre-Covid trends. The savings rate would fall back to around 17% by the end of 2027 and consumption would increase by 1% annually, "and not 1,5% on average as before."

He rules out "a catch-up effect: the high savings rate is not a reserve of money that will be consumed later".

In addition to demographic effects, some behavioral changes seem to be permanent: lower energy consumption by French people who have become more aware of energy conservation since the price surge, a growing appetite for takeaway food, and ecological motivation.

Illustrative image of the article via Depositphotos.com.