Consumer confidence released this Tuesday, May 27 is stable at 85 which is 15 points below its historical average of 100 (by construction).
For several years now (summer 2008) the indicator remains below its historical average. Is this historical average still relevant to analyze consumers’ behavior or is there a break in the process? That’s a question. Moreover this change is concomitant with long inflection in the purchasing power per unit of consumption. In other words, is the French economy characterized by a new period of low growth, more limited gains for the purchasing power or is it just a long and difficult path but which ultimately only be temporary? In other words, should we define a “new normal» for the French economy?
In addition to the household survey, it is noted that companies do not have either the ability to converge to their long-term average (survey published May 22). The graph below shows that since last fall, the business climate index (INSEE) remains stuck near 94 without giving the feeling of a rapid return to the historical average of 100 (by construction). Again does it define a new normal?
The Markit survey for France has been criticized because it was not optimistic about the French economy and because of consistent differences that were observed with the “hard” data (see here). The INSEE survey gives no more exciting signals even if they appear to be more reliable.
One can also wonder about the growth figure for the 2nd quarter with the lack of reactivity of the two surveys. The consumer confidence index has an average of 85.1 in April and May against 86.3 for the first quarter. For the business climate index, the average for April and May is 94.1 against 94.4 in the first quarter. GDP growth was zero in the first quarter; can it spontaneously rebound in the second? Households and companies do not validate such a scenario. This reinforces questions about the ability to converge towards the targets of public deficit set by the government.