In France, consumption is the engine of the economy. And its fragility. When a shock occurs, households have gotten into the habit, in recent years, of putting their money aside. And they stick to it. Since the pandemic, the French savings rate has never returned to its pre-crisis level. In the third quarter of 2024, it reached 18.2% of gross disposable income, almost four points more than in 2019.
After Covid-19, the war in Ukraine, the rise in energy costs and the inflationary surge did not encourage consumers to spend. With very concrete consequences in the accounts of the French State: when purchases of goods and services decrease, tax revenues plunge, contributing, as in 2023, to the slippage of the public deficit. However, this financial windfall has its usefulness, to finance investments, particularly in social housing via the Livret A.
Several objectives
The fact remains that the savings rate today displays an excessive level. To reduce it, the levers for action are limited. This Wednesday, January 15, the governor of the Bank of France, François Villeroy de Galhau, took advantage of his hearing before the Senate Finance Committee to announce that he was going to propose to Eric Lombard to lower the Livret A rate from 3% to 2.4% from February 1. A first since 2020. A recommendation followed up since the tenant of Bercy confirmed this reduction as of February 1st.
“This adjustment is logical given the existing method of calculation which takes into account inflation and money market rates,” explains economist Philippe Crevel, specialist in savings issues. However, these two data have been declining for several months. In December, the rise in consumer prices had slowed to 1.3% over one year, compared to 5.2% in 2022. Reducing the passbook rate serves several objectives. This aims firstly to support the construction sector and social landlords because the loans they take out from the Caisse des Dépôts – which manages the preferred investment of the French – are indexed to the Livret A rate.
By making this reduction, Bercy also hopes to encourage consumption by discouraging households from investing part of their money at this less attractive rate. “This can play a role. If we want to dissave, there is no other choice than to make the available products less interesting,” admits economist Pascale Hébel, associate director at the consulting firm C-Ways . For Philippe Crevel, this movement could result in “less collection during the first months”. At the Ministry of the Economy, however, we risk not knowing which foot to dance on. “The State can have contradictory objectives, adds the economist. The Treasury management likes to have savings, while the budget management prefers when there is more VAT.” A fortiori in a context of deterioration of our public finances.
Household confidence declines
The fact remains that consumption will not be able to pick up again as long as household confidence is this low. In December, the INSEE reference indicator lost another point compared to the previous month. “Political uncertainty weighs heavily, in particular due to the vagueness surrounding fiscal guidelines. In addition, the alarming communication on bankruptcies is not favorable. It is necessary to guarantee political stability, reduce taxes and allay fears of a possible financial crisis”, says Philippe Crevel.
On this point, the difference with the United States is glaring. “Americans have a much more utilitarian vision of savings. When their purchasing power increases or they have money coming in, they will consume. Conversely, Europeans and the French will put aside “, illustrates the expert. The impact of Donald Trump’s first decisions on consumer behavior across the Atlantic will be interesting to follow. In France, further censorship from the Bayrou government, which cannot be ruled out, would certainly erase any hope of a rebound in growth.