The party is over. The euphoria of last summer’s Olympic and Paralympic Games seems far away. Ticket sales and television broadcasting, counted, as required by the rules of national accounting, at the time of this sporting event, had then boosted growth by 0.3 points, recalls INSEE in its economic report, published on December 17, 2024. Since then, growth has declined and would be limited, for the whole of 2024, to a modest 0.8%.
The political uncertainty which has dominated since the dissolution of the National Assembly on June 9 does not help. Even before the Barnier government’s censorship, at the beginning of December, the “landscape was gloomy”, observes Dorian Roucher, head of the economic department, emphasizing that “the business climate has been below average since June 9”. INSEE has also titled its economic report “Activity suspended by a renewed confidence”.
If we look strictly from a growth point of view, the bad news accumulates. The rainy year explains the “bad harvests” which cost 0.2 points of GDP. Automobile sales are stagnating because “people renew their vehicles less often”. Do consumers refuse to buy products marked by planned obsolescence? Without going that far, economic forecasters are wondering about “the loss of appetite for certain products”. INSEE also looked into the fate of e-commerce. While the business climate of this sector was systematically placed above that of the economy as a whole throughout the 2010 decade, and peaked with the pandemic in 2020-21, the two curves came together in 2022. In other words, online sales “have become commonplace,” observes Dorian Roucher.
However, the economy was driven in 2024 by two unusual factors. Foreign trade, boosted by sales of manufactured goods, while imports which recorded a drop of 1.3%, will have contributed to this. Furthermore, public spending was sustained throughout the year. But these two sources of growth should dry up in 2025, forecasters assure. China has been pursuing an aggressive trade policy for two years: “Chinese exporters are sharply lowering their prices to increase their sales volumes”, which will not fail to reach the European market. In addition, INSEE logically expects, on the basis of the “special law” compensating for the absence of a budget, budgetary restrictions.
These mixed data have an impact on employment. Sluggish growth would no longer be able, in 2025, to absorb the growth in the active population, the volume of which is increasing by 120,000 per year, in particular due to pension reform. INSEE forecasts a slight increase in the unemployment rate by the end of June, to 7.6% of the active population, compared to 7.4% at the end of 2024.
Spanish economic miracle
-We don’t know if this is any consolation, but neighboring countries are experiencing similar circumstances. “Activity remained at a standstill in Italy and Germany,” underlines the economic report. In the euro zone, only Spain is doing better. INSEE even devotes a specific analysis to “Spanish economic dynamism since the health crisis”. Across the Pyrenees, growth since 2019 has reached 7.3%, compared to 4.8% on average in the euro zone, and the unemployment rate continues to fall. This little miracle is explained, according to INSEE, by “significant European funding”, “strong tourist attractiveness”, or a “very favorable demographic dynamic, driven by the immigration of qualified people from South America “. On the other side of the Atlantic, INSEE also highlights the “insolent health of the American economy”, where growth is maintained at a rate of 0.7% per quarter.
In France, by contrast, the growth forecast stands at 0.5% at the end of the first half of 2025. It is consumers who have the economic destiny of the country in their hands, or rather in their wallets. They have the means: the savings rate, which remained around 15% before the pandemic, has not fallen since 2021. At the end of 2024, it is increasing again, flirting with 18%. Thus, in 2024, purchasing power increased by 2.1%, more than double the growth. To put it another way, “there is a shortage of 60 billion in consumption each year compared to 2019,” asserts Dorian Roucher. The economic forecaster explains this “wait-and-see attitude of households” by “the composition of income, resulting more from dividends than wages, and therefore more favorable to savings”, and above all by “the perception of inflation”.
INSEE specialists do not hide the fact that they were “surprised” by the discrepancy between price readings at points of sale, indicating inflation at 1.3% in 2024, and consumer responses, which assure having recently noticed an increase in prices. People “took a while to realize that it was no longer increasing,” comments Dorian Roucher.
Will the money that replenishes savings accounts and life insurance be released? At the time when INSEE presented its economic report, the new Prime Minister, François Bayrou, had not presented his government, and even less a budget for 2025. Economic forecasters believe that the reduction in public spending could intimidate consumers. But conversely, simply having a stable government could strengthen confidence and encourage dissaving.
