According to INSEE, France's household savings rate will rise further, from 17.6% of gross household disposable income (GDI) in the first quarter of 2024 to 17.9% in the second quarter of 2024, a one-point increase in one year. This is also an early sign of an ongoing upward trend in the euro area. While second-quarter figures are not yet available, first-quarter figures indicate that the savings rate is three percentage points higher than its pre-COVID level (15.4%).
Indeed, while household purchasing power has improved (with wage growth outpacing inflation in most countries), this has so far only limitedly improved household confidence, limiting the desire to save.
Household savings are divided into two components. The first, residential investment, remains weak, especially since it is declining in Germany and France. This is why the second component, financial savings, is increasing. As a result, the share of financial savings in both Germany and France will rise to almost half of total savings in the first quarter of 2024, which is an unprecedented figure.
However, this figure is not only because households are saving more money, but also because they are consuming less goods than in 2019. For example, in France, consumption of goods fell from 36.7% of GDI in Q4 2019 to 34.1% in Q2 2024, while consumption of services only increased from 47.4% of GDI to 48% in the same period, with the rest being saved.
The relative decline in merchandise consumption within GDI may ultimately prove to be partly structural, which could explain why household consumption, particularly spending on nonfood items (textiles, household goods, and personal care), automobiles, and food, has not recovered despite lower inflation.
Households also appear to have new savings incentives, particularly in relation to climate change adaptation: for them, the associated transition will lead to longer life spans for appliances and equipment (including cars), reducing consumption while increasing savings to cover higher replacement costs in the long run.
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