Purchasing power could fall by 0,8% this year, according to the OFCE

With inflation estimated at an average of 4,9% over the year and economic growth down to 2,4%, "this contraction in purchasing power will weigh on the dynamics of recovery through the weak dynamics of consumption of households", judges the French Observatory of Economic Conditions which published its new economic forecasts for 2022 on Thursday.

According to the OFCE, to adapt to this loss of purchasing power, households will above all further curb their consumption, which has already fallen by 1,5% in the first quarter, despite the strong savings accumulated by some households during the Covid-19 pandemic.

The savings rate should still reach 16,7% this year.

"Households continue to save almost 2 points more than they did in the past (before the pandemic, editor's note), but in the face of a very strong shock, savings generally act as a shock absorber", that is to say that households continue to consume by drawing on these savings rather than directly reducing their consumption, underlined Mathieu Plane, deputy director of the analysis and forecasting department of the OFCE, during a press conference. .

This is firstly explained by the fact that it is above all well-to-do households who have been saving since 2020 and they are less intensely affected by the inflation shock than low-income households, who have no choice but to limit their spending. .

It is also a sign of a "prudence" of households in the face of geopolitical uncertainties, according to Mr. Plane.

In total, the OFCE predicts that consumption will increase by 2,5% in 2022 compared to last year.

These forecasts take into account the aid released since the end of 2021 to mitigate the impact of inflation on households, and that promised by Emmanuel Macron which would come into force after the legislative elections (4% increase in pensions and social benefits, increase remuneration of public officials estimated at 2% by the OFCE), food voucher, extension of the tariff shield and the fuel discount). The OFCE also assumes a 3,6% increase in wages this year.

All of these measures would make it possible to reduce the rise in prices by 2022 points in 2,1, for expenditure representing 1,7 points of GDP, or approximately 40 billion euros.

In particular, the revaluation of 4% of social benefits "will make it possible to very strongly limit the loss of purchasing power" for the households which perceive them, underlines Mr. Plane.

On the employment front, the OFCE expects continued employment growth (+0,6%) this year, with 179.000 jobs created, which would stabilize the unemployment rate at 7,3%.

Consequence of this new spending and this growth at half mast: public finances would recover less than expected by the government this year. The OFCE expects a reduction in the deficit from 6,5% to 5,6% (against 5% anticipated by the government) and a public debt reduced to 112,1% of GDP (after 112,5% ​​last year ).