French Household Confidence Begins to Climb Higher

Household confidence rose in May; the services and manufacturing sectors generally improved by more on the month. Household confidence has climbed back up above its median value since the year 2000 with a ranking in its 53.7 percentile (median is at 50.0). One interpretation of this is that France is back to some version of normal. Of course, saying that, you will face a storm of criticism. But normal encompasses a lot of diverse experiences and having the French survey back above its 26-year median should count for something.

Back to or near normal but maybe never really 'normal' ever again
That is not to say that everything is fine or back to its pre-pandemic state. But after recessions of any cause, there are always lingering losers and winners. The Covid-19 recession will be no different.

Covid-19 winners and losers
The difference with Covid-19 is that it may create broader classes of winners and losers than recessions normally do (This is setting aside the obvious point that all who died were also losers and many were old. In recessions, while the death toll usually rises, it is nothing like this has been).

Sector responses
While all three INSEE indexes are improved (manufacturing, services and household), the household index is doing the relative poorest. Its 53.7 percentile standing on data back to 2000 is below the 75.1 percentile for services and the 79.6 percentile for manufacturing. On the relatively short horizon below that looks at the aftermath from the first Covid-19 attack and takes in secondary attacks, it is clear that manufacturing and services were hit much harder than the household sector in terms of confidence values and yet they have sprung back the most. On this timeline, manufacturing had a low percentile standing of 12.7%, services hit a low of 2.7% while the household sector low was a stronger 25.7%. The household standing has more than doubled from its low while manufacturing and services are multiples of their low standings. All the lows are crafted on their respective sector data back to January 2000.

The household situation
Living standards over the past 12 months saw their assessment lifted slightly in May but really only back to levels of February and to a 14.4 percentile standing at that. Looking ahead to the next 12 months, the assessment gains move to -26 in May from -36 in April and continue an ongoing trend of improvement. The May assessment rises to its 65.4 percentile standing.

Expectations for unemployment continue to drop, this month to a reading of 49 from a diffusion value of 62 in April and as high as 73 in February, to cite a short history. The current diffusion value in May has a percentile standing of 64.2 which is high as it's still well above the median, but it is falling in a determined way.

Price developments both past and future are showing more pressure with the past at a low 25.7 percentile standing. Over the next 12 months, the standing of the survey is in its 91.1 percentile, quite high. Clearly inflation is expected. How much is expected, the survey does not tell.

Survey participants have seen only slight changes in the responses to questions about the favorability or their ability to save over the past 12 months or next 12 months with both responses at extremely high percentile standings. The favorability of spending in the current environment has been gradually improving. In May, it was unchanged at the April level, leaving it at a 51.4 percentile standing.

The financial situation has past and expected values both show improvements on the order of three to four points since February. The standings show a higher 87.2 percentile position for the past compare to a 72.4 standing in May for the future.

The final column looks at changes in the index compared to January before the virus struck. Overall confidence is lower on that comparisons by 6.9 points.

What has worsened since January 2020
Compared to January 2020, the largest change in current or expected components is the 41.8-point rise in the unemployment response. There is also a 7.1-point increase in the expected inflation response. The ability to save is assessed at 13.8 points higher. The spending environment is five points worse and the financial situation expected is 1.3 points worse than in January 2000. On balance, the current and future ratings are mostly worse than they were in January 2020. But the overall standing for household confidence is still above its 26-year median.