The Viavoice - BPCE barometer survey of French consumer plans - December 2011

French worried by potential loss of Triple A and new restrictions on purchasing power

The crisis is deepening and is increasingly worrying the French population. While INSEE (the National Institute of Statistics and Economic Studies) foresees a period of recession and a sharp rise in unemployment at the beginning of 2012, 55% of the French expect purchasing power to drop, an increase for the third consecutive month. But most importantly this latest deterioration in economic prospects brings two potentially serious threats to bear on the French economy:

• The possible loss of its Triple-A rating, increasingly expected since ratings agencies put it on credit watch. And though the consequences of a downgrade fuel public debate, they already trouble the French: over three out of four (77%) expect worrying consequences for the economy and almost one in two (49%) for their personal financial situations.
• In parallel, the repercussions of this loss of purchasing power on household consumption are troubling, with a perceptible drop in intended spending at the end of this year. Compounding the damage from this change is the fact that, up to now, consumption seemed relatively safe and appeared to be absorbing the shock of austerity and the drop in investments.

Purchasing power: worries over the cost of energy return

Concern over purchasing power reached a new high, one of the highest in the past year: 55% of people surveyed think their purchasing power will decrease in the next three months. Of those people, 28% think it will "greatly diminish." In concrete terms, this rise comes in an alarming economic environment, but it is also fueled by growing pressure on certain kinds of expenses, primarily energy costs:

• Though the drop in crude prices during the summer momentarily shifted this question to the back burner, concerns over gasoline prices came back to the fore among the French, with 38% citing it as one of the expenses that worried them most, increasing 10 points in one month.
• At the same time, the announced increase of the regulated gas tariff (on January 1), not to mention electricity sometime in 2012, explain a resurgence of fears over all energy expenses: electricity is cited by 32% of people surveyed, an 8-point increase; while gas is cited by 28%, an 11-point increase.

Towards a drop in spending in the first quarter of 2012?

Although up to now intended spending remained relatively stable, despite the economic environment, this trend should reverse in the upcoming months. 36% of the French plan to spend less money than in recent months, a 4-point increase. On the other hand, only 9% (-3) plan to spend more.
Furthermore, this drop in consumption should be especially pronounced among seniors (41% plan to spend less), who are also those who are most likely to expect a drop in their purchasing power (65% of them).In addition, such grim prospects explain why the total intended spending index fell (67, -13 points), barely held back by the relative stability of intended car purchases at 7% (-1).

Potential loss of Triple A: Worrisome consequences for three out of four French people

At a time when both the government and the opposition blame each other for rising deficits, public opinion seems to have largely understood the risks incurred by the possible loss of the Triple-A rating for government finances, as well as the indirect consequences on the governments and state-owned businesses.

• As a result, 77% of the French expect worrying consequences for the French economy, or even "very worrying" for 35% of them, despite government efforts to keep the matter in proportion;
• Significantly, according to public opinion this question is related to day-to-day hardship, as nearly one in two French citizens (49%) expect worrying consequences for their own financial situations.

Consequently, 2012 seems to be off to a particularly bad start, trapped between market constraints and austerity measures: should consumption flag and deficits increase, growth prospects could suffer even more, fueling the recessionary spiral. It is an economic and psychological backdrop that should weigh heavily on the presidential campaign as long as purchasing power remains the major concern of the French population.

For more information: the French barometer survey