The drop in the savings rate, a risky bet to revive growth

In its stability program - a multi-year budget plan recently sent to Brussels - the executive expects the household savings rate to fall slightly in 2024, to 17,2% of their gross disposable income (GDI). ), compared to 17,6% in 2023.

In 2025, the percentage of their income that the French put aside would decrease more sharply, to 16,5%. The government hopes that this unsaved money will be spent and support household consumption, one of the most powerful engines of French growth.

But for the BPCE group's research director Alain Tourdjman, "it is difficult to influence the behavior of households".

For this reason, "we should rather expect a gradual and progressive decline in the savings rate rather than a very rapid decline" as the government hopes.

In a study published Monday, BPCE expects this indicator to stabilize at 17,5% of household income in 2024, an estimate close to that of INSEE (17,9%).

The French Observatory of Economic Conditions (OFCE), even more pessimistic, expects the savings rate to rise to 18,1% in 2024 before falling to 17,5% in 2025.

The sums at stake are considerable: a drop of one point in the savings rate would inject more than 17 billion euros into the French economy, illustrates Dorian Roucher, head of the economic department at INSEE.

A return to the historic savings rate of 15%, which prevailed for a long time before the Covid-19 pandemic and then the surge in inflation encouraged the French to add more to their nest egg, would correspond to an increase in “35 to 50 billion euros” of household consumption, he continues.

“It’s a lot,” concludes Dorian Roucher, while French GDP reached 2.639 billion euros in 2022.

“Sustainable change” in behavior

According to Alain Tourdjman, "to obtain this reduction in the savings rate, it would be necessary to create the conditions of greater confidence in the economic future of the country (...), in the capacity for young people to have jobs properly remunerated...

However, France is “one of the most pessimistic countries regarding the collective future”, he notes.

The situation is radically different in the United States, where "faith in the future" is "a little consubstantial with the state of mind of the country", underlines Mr. Tourdjman. The American savings rate has also fallen much more quickly than in Europe since the health crisis.

But the pessimism of the French does not explain everything.

Among the factors that push households to save, Dorian Roucher also cites "the real cash flow effect": a technical term which means that to compensate for inflation which reduces the real value of their savings, households put in more money aside.

The OFCE agrees: "if households have been saving more for four years, the purchasing power" associated with this dormant money "is not necessarily higher, which will not push households to draw down in excess savings which have melted" because of inflation.

Finally, a certain amount of additional savings accumulated since the pandemic corresponds to “precautionary savings”, directly linked to the “environment of generalized uncertainty”, recalls Alain Tourdjman.

Since 2018, crises have indeed followed one another: “yellow vests”, pandemic, war in Ukraine, inflation, he lists.

France is not an isolated case, the savings rate having increased in many European countries such as Spain, whose inhabitants are usually less inclined to hoarding than the French, argues Dorian Roucher.

The government itself admits that it has not completely unraveled the mysteries of the savings rate.

Its maintenance "at a level still well above its long-term average raises the question of a lasting change in consumer behavior", he writes in his stability program.