Purchasing Power: Resilient Consumption Amid Lasting Constraints
Despite the decline in inflation and moderate economic growth, the purchasing power situation of French households remains fragile at the end of 2025. The latest data released by the Insee and projections from the Bank of France outline a mixed picture: consumer spending is holding up, but only at the cost of increasingly constrained budgetary trade-offs and a persistent reliance on savings.
Purchasing Power Still Weakened by Past Inflation Shock
After two years marked by high inflation, purchasing power continues to be affected by the cumulative effects of price increases observed in 2022 and 2023. According to INSEE, the purchasing power of gross disposable income per consumption unit declined in the third quarter of 2025 (down 0.4% compared to the previous quarter), confirming that the improvement seen in 2024 was not sufficient to sustainably restore the households' consumption capacity.
Inflation has certainly slowed significantly in 2025, averaging around 1% for the year, compared to over 5% in 2022. This normalization of prices has allowed for a gradual recovery of nominal wages, notably through wage negotiations. However, the income increases do not fully offset the previous erosion of purchasing power, particularly for low-income households and the middle class.
Stable Consumption Supported by Savings
Despite these tensions, household consumption is not collapsing. According to national accounts, it is growing slowly but remains generally stable for the year 2025, with a slightly positive trend over the recent quarters.
This resilience is largely based on a still high level of savings. The household savings rate reaches about 18% of gross disposable income in the third quarter of 2025, which is nearly three percentage points above its pre-pandemic average, estimated at around 15%. Savings thus play a buffering role against economic and budgetary uncertainty, allowing consumption to be smoothed out at the expense of discretionary spending or long-term investment projects.
Moderate growth lacking a true internal driver
On the macroeconomic front, France is operating in an environment of limited growth. The Bank of France forecasts GDP growth of around 0.9% in 2025, following an estimated growth of 1.1% in 2024. This modest trend reflects weak domestic demand and a still uncertain international context.
In this setting, purchasing power is making weak progress over the year, with an annual increase estimated to be below 1%. Insee emphasizes that this development is insufficient to support a real rebound in consumption, especially as income from assets is impacted by monetary normalization and the tax burden remains high for some households.
What are the prospects for 2026?
Outlook for 2026 remains cautious. Current projections suggest only limited growth in purchasing power, amid constraints on public finances and uncertainties surrounding fiscal policy. The Bank of France forecasts GDP growth around 1%, with inflation stabilized at approximately 1%, thereby limiting the potential for real income growth among households.
Under these conditions, consumption is expected to remain a pillar of economic activity, but not a driving force. For economic observers and investors, this situation reflects a structurally constrained domestic demand, where high savings levels signal prudence rather than confidence in the face of economic and fiscal uncertainties.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
