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Economy in Brief

French Household Confidence Steps Back a Bit
by Robert Brusca  January 26, 2022

Given recent events it would be quite a surprise if French confidence has not backed off a bit in January. French President Emmanuel Macron has had a confrontational bit of rhetoric with the unvaccinated in France. Omicron infections, of course, have been spreading. They have shot up especially sharply in France in January. However, as we have seen elsewhere, even with a new peak in infections that dwarfs anything France has seen in the past, Covid deaths are rising on a shallow gradient and remain well below past peaks.

Recent French data show: "France has reported a record number of COVID-19 cases, with more than 500,000 new infections registered within one day. According to the French health authority, 501,635 new infections were registered within 24 hours. However, the numbers are often much lower on Mondays than on other days of the week. The Omicron variant now accounts for more than 95 per cent of cases in the country of 67 million inhabitants." (Source here).

France remains non-plussed
In addition to the Omicron issues, there is also the situation in Ukraine that has much of Europe on edge. While there is a decline in household confidence logged this month, the chart shows only a very gradual reduction in confidence over recent months. There is no evidence of any knee jerk reaction to either the Omicron or Ukraine situation. Confidence currently is hovering at the 62nd percentile of its historic queue of data, a firm reading.

The standings across responses
The most extreme response standings in the survey are the 91-queue percentile standing for past price developments and the even higher 97.3 percentile queue standing for price development expected over the next 12 months. There are also 90th percentile standings for savings metrics. The response to favorable time to save has a standing of 93.4 with the ability to save at 99.2.

Unemployment over the next 12 months has a 10.9 percentile standing which is a good reading since it says that the worry about unemployment has been lower only about 11% of the time. The past financial situation also gets an 80th percentile standing one in the 82.1 queue percentile for the previous 12 months, but for the next 12 months that drops off sharpy to just above the median at a 56.4 queue standing.

Living standards log relatively mundane values with queue standings of 52.9 for the past 12 months and of 51.4 for the next 12 months. These are readings barely above their respective period medians.

Weakest of all the responses is the response for to 'favorable time for spending.' The response for this is low, below median 40.5 queue percentile standing. The spending environment has been 'worse' only about 40% of the time and better about 60% of the time. That is not a reassuring response.

Momentum
Setting aside the absolute standings for survey items, we can look at the month-to-month changes. On that basis, there are small and mixed changes. We know the headline deteriorated slightly. The assessment of past and future living standards also weakened by 3 points for each measure. The expectation for unemployment was unchanged on the month. Price developments were stronger by two points for past developments and by one point for the next 12 months; in the case of the next 12 months the response was a smaller (in absolute value) negative number. Both saving metrics improved month-to-month. The spending environment deteriorated by 3 points month-to-month to its lowest value since November 2021 when it was substantially lower. Finally, the financial environment was deemed better over the last 12 months as well as for the next 12 months- in each case by one point. There has been little change over these assessments over the last four months.

Extent of Covid recovery
Comparing the current levels to what they were before Covid struck finds the overall household confidence indicator lower by 5.7 points. Past living standards are weaker by 17.4 points than were in January 2020; the look ahead next 12-month assessments are weaker too but by only 6.2 points.

The unemployment expectations are weaker now than it was in January 2020 by 3.8 points and that is a stronger result since unemployment is feared less.

Price development show some huge changes. The assessment over the past 12 months is higher by 61.9 points than it was in January 2020. The outlook for the next 12 months is higher by 17 points compared to its level in January 2020.

The two assessments for saving are higher now than they were in January 2020. The financial situation past and future are both weaker than they were. And the spending environment is less robust than it was by 10.5 points.

The upshot is that France is still not recovered fully compared to the level it had achieved in January 2020 before Covid struck. Near-term momentum is mixed but leaning to more negative results. However, the standing of the current household responses indicates that the economy is in no jeopardy.

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