French Household Confidence Improves Slightly; The Slight Improvement Leaves Confidence Still Very Weak

In this situation, the Insee survey on household confidence in France showed a small uptick in October although that still leaves it short of its August level and leaves it at a weak ranking on data back to 2001. Ranked on that timeline, confidence currently has a 10.6 percentile standing, implying that it has been this weak or weaker only about 10% of the time during that period.

Strength in the survey is rare- Most of the components of this survey are weak. The exceptions are price developments, of course, because inflation is still high. Inflation over the last 12 months saw an uptick in the assessment in October compared to September and an overall ranking in its 95th percentile. However, expectations for the next 12-months show a slight reduction for inflation that's anticipated and a ranking that is only in its 12.8 percentile, indicating that inflation is broadly expected to be on a declining profile ahead. The other component that has higher standing is the assessment of savings. This is usually a negative barometer since when spending conditions are poor savings conditions turn out to be better and that's true this month in the Insee survey. However, month-to-month the assessment ‘favorable to save’ fell relatively sharply to 28 in October from 36 in November as the ‘ability to save’ for the next 12 months was unchanged. Even so, with the sharp drop this month, the ranking of the favorability for savings has an 82.8 percentile standing and the ranking of the ability to save has an 88.3 percentile standing.

Weak living standards: But unemployment expectations are a positive- The rest of the surveyed components show anything from substantial to extreme weakness. The living standard assessments show past living standards unchanged month-to-month and with a 2.2 percentile standing. This implies that living standards over the last 12 months have been that bad or worse only about 2% of the time. Over the next 12 months, living-standard expectations improve slightly but still only register at 18.6 percentile standing - a standing in the bottom 20% of the historic queue of data looking back to 2001, a period of just over 20 years. Unemployment expectations over the next 12 months fell slightly in October to a reading of 17 from a reading of 20 in September. This has a 29.9 percentile standing. In this case, the low standing is relatively good news because it means expectations for unemployment are relatively low.

Spending environment has rarely been worse- The environment for spending deteriorated slightly on the month with an October reading that fell to minus 45 from minus 44 in September. The ranking of this reading is in the bottom one-percentile of all readings back to 2021. French respondents to this series find this an extremely unfavorable time and make major purchases, having been this bad or worse only about 0.7% of the time over the last 20 years – the third worst year for major purchases back to 2021 (worse only in June 2023 and in April 2020).

The financial situation is poor- Given the poor outlook for the spending environment, it's not surprising that the financial situation also gets low marks. The situation over the past 12 months improved just a tick from September, but the response has a low, 9.9 percentile standing implying that it's been this bad or worse only about 10% of the time historically. Looking over the next 12 months, there's another small two-tick improvement in the survey that produces a ranking in its 35th percentile. That's still nearly a bottom 1/3 standing for the expected financial situation – an improvement compared to the bottom 10-percentile. It's a weak reading, but not as weak as some of the other assessments in the table.

Weakness in past living standards, spending and the past finical situation seem to play a large role in setting the bar of assessments so low in October. The overall confidence indicator has a 10.6 percentile standing.

The turbulent wake of COVID- Much of this weakness has come in the wake of COVID. Comparing household confidence, for example, in October 2023 to its level in January 2020 before COVID struck, the measure is 20.4 points lower than it was in early-2020. The assessment of past living standards is 41.9 points lower and the expected living standards are 26.5 points lower. The response on the unemployment rate is about 11 points higher than it was in January 2020. The inflation, of course, is much worse with past price developments up by nearly 100 points, but then, of course, the expected future expectations are lower only because inflation is high, and it's expected to unwind to some extent. The spending environment is worse than it was in January 2020 by some 38 points. The financial situation in the past 12 months is worse by 16.8 points than it was in January 2020 and the financial situation expected in the 12 months ahead is worse by 12.9 points – what they did not know in January 2002 nonetheless hurt them badly. Remember that expectations are just that and nothing more.

Low confidence readings are persisting- Overall, this survey is still quite weak and as the graph shows conditions have been quite weak since mid-2022. Before COVID stuck in January 2020, the household index had a value of 104.4. In the depths of the COVID crisis, it fell to 89.2 in November 2020. The post-COVID rebound took this indicator up to a brief high of 103.3 in June 2021. After September 2021 the index began to slip and by mid-year France was registering these very low mid-80s reading on the index that prevail today. The recovery from the lows of this period is progressing very slowly so far.