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Economy in Brief

French Confidence Hovers in Weak Territory
by Robert Brusca  October 26, 2022

French consumer confidence rebounded in October to 81.9 from a reading of 79.5 in September. The 81.9 level is close to the August level of 82.2 and this reading has been fluctuating in a range of 82 to 79 for the past five months. Today's reading is not a surprise; it's not news; the month-to-month fluctuation is not significant. It's simply an indication that confidence remains in this very low habitat where it's been in the aftermath of the Fed beginning to raise rates aggressively in March and the start of the Russia-Ukraine war in February.

Living standards over the last 12 months in France posted a -79 reading, the same as in September, among the weaker readings over the last five months. The outlook for living standards over the next 12 months has a -64 reading that stacks up as one of the stronger readings over the last five months but not by a lot.

Expected unemployment over the next 12 months has a +23 reading the same as in September. These two numbers are significant steps up from what they had been from June to August. Price developments show prices over the last 12 months with the reading of 61 which is in the middle of where they've been for the last five months. The reading over the next 12 months is flat that leaves it hovering and just slightly weaker territory than it's been for most of the last five months.

The assessment of whether it's a favorable time for savings declined month-to-month to a reading of 26 in October from 31 in September, but these generally reflect stronger readings than for the previous three months. The ability to save over the next 12 months has a -5 reading, the same as in September and these represent deteriorated readings over the last five months.

Responses to the survey question 'is it a favorable time to make a major purchase' log a -37 reading in October which is roughly where it's been over the last five months - not much change.

Households assessed their financial situation over the last 12 months as a -29 reading, a slight improvement from where it had been in the previous four months. The assessment for the next 12 months has a -23 reading which is only slightly improved from its habitat over the last five months.

Where these readings ranking
In terms of the rankings for these various responses, the household confidence index has a 3.1 percentile ranking (standing) which is extremely weak although it's only in the same territory that it's been over the last five months or so. This is a lower 3% of habitat reading among all readings since 2001 and that's a period of nearly 22 years. Living standards both past and expected for the next/pervious 12 months also have extremely weak readings in their lower 3 percentile. Unemployment expectations stand higher in their 34th percentile; workers are beginning to get a little concerned over the outlook for unemployment. Price developments show that prices over the past 12 months as well as over the next 12 months have a 95 to 97 percentile standing compared to historic expectations. Inflation has been and is expected to remain high. The favorability of the environment to save is good with an 81.2 percentile standing. However, the ability to save over the next 12 months is more moderate with the roughly 60th percentile standing. The favorability of making a major purchase is a lower three percentile standing in the same weak relative habitat as the household confidence and living standard standings. The financial situation over the last 12 months is assessed at a 21-percentile standing. But looking to the next 12 months conditions are expected to worsen with only a 7-percentile standing. Clearly these are challenging times for French households and are recognized as such.

Pre-COVID comparisons are disappointing
The transition of these current readings compared to the pre-COVID. Show a great deal of weakness the household confidence index is weaker by 23 points, living standards are weaker by over 40 points, the ability to save is weaker by four points, the spending environment is weaker by 27 points, the financial situation both current and next are between 15 to 20 points weaker. The things that are stronger are not improvements they include is the expectation for unemployment that is 25 points higher and the readings on price developments over the past 12 months that are 95 points higher and for the next 12 months that are 23 points higher. However, the favorability of the environment for saving also shows improvement compared to the pre-COVID; that reading is 20 points higher.

On balance, French households are feeling a great deal of pressure and it's not surprising given the global environment. Inflation is high in France. The European Central Bank is raising rates. There's a war going on in Europe between Russia and Ukraine. There are myriad political reshufflings that have occurred in recent months in Europe from the U.K. to Italy.

Uncertainty stalks and rules
The uncertainty of the times clearly is reflected in this French survey, and we see French household confidence really hugging to some of the lower values that it has experienced. Recently it has only seen lower lows very briefly during the COVID period. The survey paints a continuing demanding situation for France and for the French consumer; there's not much positive news to take away from this survey.

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