Faced with the crisis, the French are curbing their consumption and starting to save again

Posted Oct 6, 2022, 5:03 PMUpdated Oct 6, 2022 5:48 PM

In the context of the energy crisis that is taking hold, growth in France should be flat at the end of the year, or almost. This Thursday, INSEE confirmed its mid-September forecasts: namely a 0.2% increase in GDP in the third quarter, followed by stagnation in activity over the following three months, a contraction of the economy is not excluded in the event of energy-related restrictions.

Ultimately, the French economy would grow by 2.6% in 2022, a figure close to that expected by the executive (2.7%). The year 2023 would therefore start with a very modest growth overhang of 0.2% in view of which the objective of a growth of 1% posted by Bercy for next year appears very ambitious.

Inflation at 6.4% at the end of 2022

Even if it is limited by the measures taken to cap energy prices, inflation in France remains high. After a lull, it should start rising again from November to reach 6.4% at the end of the year, due to the gradual disappearance of the discount at the pump and the base effects, indicates INSEE which retains in its forecast a price of 95 dollars for a barrel of Brent.

What undermine the morale of households fell to the lowest since 2013 in September. Between the high cost of living, a darkening economic outlook and renewed fear of unemployment, the mood is less and less on spending. INSEE estimates that the French could turn out to be more ants than cicadas in the coming months and expects precautionary savings to rise to 17.2% of disposable income by the end of the year. A rate significantly higher than that observed at the end of June (15.5%) or before the health crisis (14.8%).

The measures deployed by the executive to protect household purses should, however, lead to an improvement in purchasing power in the second half. “Over the whole of 2022, the gross disposable income of households should increase by 4.7%, including around 1.3 points due to the support measures voted during the summer or announced since then”, specifies the Insee.

Lower fuel and power expenses

This rebound will not avoid a stagnation in purchasing power in 2022, due to inflation, and even a drop of 0.6 points compared to 2021, for purchasing power measured by consumption unit, account given the decline recorded in the first half.

Faced with the slowdown in the job market, the French could exercise caution and tighten the purse strings. Already, households have started to cut spending on fuel and food, which are the most exposed to price increases.

In the third quarter, consumption would increase “moderately” by 0.3% but it would almost stagnate (+0.1%) at the end of the year, according to INSEE. Engines of growth at the start of the year, services (catering, hotels, leisure, etc.) should run out of steam. As for purchases of goods, already at half-mast at the start of the year, they should remain poorly oriented.

The energy sobriety plan presented this Thursday by the government represents an additional “downside hazard” on consumption, recognizes INSEE which, at this stage, has not quantified it. Everything will depend on the constraints that will be imposed on households.

Sections of industry representing 8% of GDP exposed to the energy crisis

Chemistry followed by air, land or water transport. Next, metallurgy, the paper and cardboard industry, fishing and aquaculture: INSEE has identified a dozen sectors whose energy consumption represents at least 5% of production – excluding energy-producing branches – which in the current context could be exposed to difficulties related to energy supplies. These sectors represent 8% of the total production of the economy, according to the statistical institute.

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