After the Banque de France, it is the turn of the Statistics Institute to anticipate weak GDP growth at the start of next year. Consumption, in particular, is slow to pick up.
Additional bad news for the future government of François Bayrou. It comes from economic activity, which is stagnating in the last quarter of the year, and this should only improve a little in the first six months of 2025, according to a note published by INSEE this Tuesday December 17. After growth in gross domestic product of 1.1% this year, it should only progress slightly, by 0.2% in each of the first two quarters. This means that to achieve 1.1% growth in 2025, as included in the late Barnier government’s draft budget, an increase of 0.8% would be required twice in the last quarters. Which, as Dorian Roucher, head of the economic department, notes, is “a high pace for French growth”. Difficult to achieve therefore, as also noted by the Banque de France, which delivered its latest forecasts on Monday, December 16, revising French growth downwards, to 0.9% in 2025 compared to 1.2% previously anticipated.
The two engines that were fired up this year to drive activity, sometimes to the surprise of forecasters, are expected to stall. One, public spending, should be curbed by the special law adopted in the Assembly on Monday, which temporarily replaces the finance bill and can – at best – only renew the amounts passed in the budget for 2024. L The other driving force, foreign trade, should return to usual levels.
Neither businesses, through their investments, nor households, through their consumer spending, would truly take over. The former have already reduced their investments (by 1.6% this year) despite the reduction in key rates by the European Central Bank and, plunged into political and budgetary fog, they are waiting to invest again. “Monetary easing and the acceleration of foreign demand would constitute supporting factors, but, conversely, the climate of uncertainty would lead to a freeze on investments,” notes INSEE. On the employment side, “it withers, but does not unscrew”, with an unemployment rate which would increase from 7.4% of the active population in the third quarter to 7.6% in mid-2025.
An inflation forecast of 1%
As for households, they are still slow to revive the traditional engine of French growth, consumption. Disinflation could, however, encourage them to do so: prices are only increasing by 1.3% over one year in November, and INSEE anticipates inflation of 1% over one year in June. The progression of their purchasing power too: it has finally increased this year by 2.1%, after 0.9% last year, and, calculated per consumption unit, which better reflects the average individual situation, by 1 .5% after 0.3%. This is explained by the revaluations of social benefits, which occur after the inflation observed, and therefore with a delay. Basic pensions, in particular, were increased by 5.3% at the start of the year. Employees are gradually recovering the losses accumulated since 2022 – they are halfway there. “The cumulative purchasing power gains in wages in 2024 and early 2025 (1.6% for the average wage per capita) would remain lower than the losses in the two years 2022 and 2023 (-2.8% for the SMPT corrected for unemployment). partial)”, calculates INSEE.
Why is consumption not picking up again and why are savings remaining so high, at a record rate of 18%? INSEE observed through its surveys that households took time to realize the end of the inflationary episode. This gap between the cessation of the price increase recorded in the statistics, particularly for energy, and its perception by households lasts between six and eight months. Furthermore, income also includes that of assets, which tend to be retained. This colossal savings, 4 points above that of 2019, is “a sign of a form of wait-and-see attitude on the part of households”. If we returned to the 2019 level, this would correspond, adds Dorian Roucher, to 60 billion euros in additional consumption over the year. A wait-and-see attitude that could end in the event of “rapid restoration of confidence”, suggests INSEE. This was the case this summer, thanks to the Olympics and the elections. A bubble of optimism that quickly burst…
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