Traditionally, the French are fond of wool stockings. The French savings rate is one of the highest among OECD countries, along with Germany, Sweden and Switzerland. An inclination which increased like never before during the Covid period, when the population was under house arrest. The savings rate then skyrocketed to reach 21.4% in 2020, when it had hovered around 15% for the past twenty years. Once freed from health constraints, consumers were quick to find their way back to the physical and virtual shelves, drawing on their reserves with, as a result, a saving boost to growth.
But the joy was short-lived. Disruption of supply chains, war in Ukraine, low availability of nuclear power… Inflation has accelerated, putting a strain on French wallets. “In periods of rising prices, there is always a tendency to increase one’s savings for fear of missing out,” explains economist Philippe Crevel. A reflex that is not so intuitive in the eyes of Christian Parisot, economic advisor at Aurel BGC: “Generally, in the event of pressure on purchasing power, households reduce their monthly savings to compensate a little for this shock”, maintains the expert.
A strong trend among those over 50
The energy shock has now been overcome and as inflation falls – 3.4% over one year in November, compared to 6.2% a year earlier – the French are once again dipping into their savings, with moderation. In the third quarter, the household savings rate stood at 17.4%, after 17.9% in the previous quarter. “This means that they are seeing more clearly the threat posed by this economic shock. They have understood that the inflation peak is behind them. However, we will not return to the situation of “before the crisis”, warns Stéphanie Villers, economic advisor at PwC France.
The blow is indeed far from over. Economists still see excess savings which could persist over time. And for good reason: confidence in the economy is not good. “There are concerns linked to climate change in the future. The birth rate is falling, this is a sign that the French do not have confidence and do not plan ahead. For this reason, they constitute precautionary savings “, underlines Pascale Hébel, associate director of C-Ways, a consulting and data study company.
Especially since more structural factors explain this still high rate. “Even before the health crisis, we noted that there was a slight increase in the savings rate linked to the aging of the population. The French are anxious about their future or current standard of living in retirement,” adds Philippe Crevel. However, it is after the age of 50 that we save the most and if the proportion of this age group increases, inevitably, the savings rate also increases. At the risk of lastingly threatening French growth. “We are going to arrive at the same scenario as in Germany where the aging of the population is more marked than in France. We can no longer afford to rely solely on consumption which represents more than 50% of GDP. We must “we become an export leader and are further ahead in artificial intelligence and digital technology,” judges Pascale Hébel.
The role of political discourse
Faced with this great caution, political speech is essential. If measures to support consumption do not seem to be a solution, the speech addressed to the French, on the other hand, is a factor of influence. “We are talking about unraveling the social model, that there will be no retirement tomorrow, that the debt is too high. The ambient discourse sounds like ‘the party is over’, that does not encourage consumption,” believes Eric Heyer, director of the Analysis and Forecasting Department of the OFCE.
A touch of optimism would be welcome. “If I compare France – and even other European countries – to the United States, there is no comparison. Washington is setting up a real policy to reindustrialize the country. Besides that, Europe has no projects. For example, we realize that even if we were to buy solar panels, it would be done abroad. We need another discourse, which is a little more proactive, less catastrophic,” adds the economist.
The world’s leading power also has an extremely low savings rate, at 3.8% in September. “There is a big difference in mentality which can be explained by the nature of these two countries. Americans can afford to live on credit and fear the future less,” recalls Stéphanie Villers of PwC France. As a result, American growth is soaring, that of France is slipping.
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