Households remain cautious despite rising purchasing power and savings
The French economy grew by 0.4% in the third quarter of 2024, according to the latest figures confirmed by INSEE. While this modest increase in GDP reflects relative stability, it masks a notable shift in household behavior.
Despite a 0.7% increase in their purchasing power, they did not give in to the temptation to spend more. On the contrary, they chose to increase their savings efforts, driven by an economic and political climate that remains uncertain.
A Welcome Boost to Purchasing Power
Gross disposable household income, adjusted per unit of consumption, rose sharply in the third quarter. This improvement is part of a recovery trend that began in the previous quarter (+0.4%). The gradual decline in inflation, combined with wage adjustments in several sectors, has given households some breathing room.
However, this upturn has not translated into higher consumption. Households have chosen to capitalize on these gains by saving more. According to analysts, this decision stems from a still-negative perception of their medium-term economic situation. Households see an improvement in the statistics, but not yet in their daily lives. They remain cautious.
Savings on the Rise
INSEE figures confirm this cautious trend: the household savings rate reached 18.2% of gross disposable income in the third quarter, up from 17.9% in the previous quarter. The financial savings rate, in particular, jumped to 8.8%, up from just 6.2% a year earlier. This trend reflects a growing preference for secure investments such as the Livret A savings account, which saw record-high deposits in 2024.
Political and economic uncertainties play a major role in this trend. Households are protecting themselves against persistent fears, such as a possible tax increase or an unstable economic climate.
Inflation on the Decline, but Sentiment Remains Negative
Despite a drop in inflation from the peaks reached in 2023, households remain wary. “Perceptions of living standards are improving only slowly, as past price increases continue to weigh on household budgets,” explains a report from INSEE. Essential expenses, such as energy and food, although stabilized, remain high, which limits the perception of real relief.
Political uncertainty, amplified by international tensions and domestic debates over taxation, reinforces this wait-and-see attitude. Households prefer to save in anticipation of unpleasant surprises, rather than get carried away by a still-fragile recovery.
An Expected Uptick for the Holidays, but Nothing Excessive
With the holiday season approaching, households are expected to ease up a bit on their saving efforts. Consumer spending, which traditionally gets a boost during this time of year, could benefit from the recent increase in purchasing power. But according to analysts, this uptick will be moderate.
The retail and non-essential goods sectors—such as toys and electronics—could fare relatively well, though they are unlikely to return to pre-crisis levels. Retailers are already anticipating a challenging sales environment, marked by an increased demand for promotions and responsible purchasing.
A trend to watch
If household savings continue to grow at this rate, they could play a paradoxical role in the economy. On the one hand, they strengthen households’ financial resilience in the face of unforeseen events. On the other hand, they slow the recovery in consumption, the traditional driver of French growth.
It is essential to restore confidence in order to bring economic behavior back into balance. This requires greater transparency regarding fiscal and economic policies, as well as clearer communication about the actual impacts of falling inflation.
In the meantime, the French economy will have to contend with cautious households and lackluster consumer spending, while record-high savings continue to climb. This dual trend, while reflecting the resilience of the French people, also highlights their uncertainty about the future.
