Stagnant incomes, energy inflation, high interest rates, and a depleted budget: the French economy is now operating without a safety net. The danger lies less in the severity of each individual imbalance than in their simultaneous occurrence.
𝗣𝘂𝗿𝗰𝗵𝗮𝘀𝗶𝗻𝗴 𝗽𝗼𝘄𝗲𝗿 𝗰𝗮𝘂𝗴𝗵𝘁 𝗶𝗻 𝗮 𝘃𝗶𝗰𝗲
Incomes are rising only slightly while inflation is accelerating. This price increase is primarily driven by energy, giving it a very specific geographical pattern: it hits hardest in areas where cars remain essential. In rural and suburban areas, where commutes are longer and public transportation is scarce, every increase at the pump directly impacts household budgets.
𝗧𝗵𝗲 𝗦𝘁𝗮𝘁𝗲 𝗰𝗮𝗻 𝗻𝗼 𝗹𝗼𝗻𝗴𝗲𝗿 𝗮𝗰𝘁 𝗮𝘀 𝗮 𝗯𝘂𝗳𝗳𝗲𝗿.
During previous spikes in gasoline prices, the adjustment largely fell on social benefits: public transfers offset part of the shock that labor income could not. This mechanism has now broken down. With virtually no budgetary leeway, the government no longer has the means to support household income. This time, households will absorb the shock.
𝗖𝗼𝗻𝘀𝘂𝗺𝗲𝗿 𝗰𝗿𝗲𝗱𝗶𝘁 𝗶𝘀 𝗰𝗹𝗼𝘀𝗶𝗻𝗴 𝗱𝗼𝘄𝗻
The rise in interest rates adds another constraint. It weighs heavily on the middle and upper-middle classes, those who until now could borrow to smooth their consumption or finance their projects, particularly in real estate. This lever is closing. From the bottom to the top of the income scale, margins are shrinking: the poorest are bearing the brunt of energy costs, while the middle classes are struggling with the cost of credit.
𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝗶𝗻 𝗮 𝗵𝗼𝗹𝗱𝗶𝗻𝗴 𝗽𝗮𝘁𝘁𝗲𝗿𝗻
In the very short term, the dynamism of global trade is boosting the economy, and businesses should take advantage of this. However, in a complex and uncertain political context, business leaders prefer to wait rather than commit to investments. It is surely better to wait for the election results before considering investing, at the risk of hindering growth.
𝗧𝗵𝗲 𝗿𝗲𝗮𝗹 𝗿𝗶𝘀𝗸: 𝗱𝗶𝘀𝗿𝘂𝗽𝘁𝗶𝗼𝗻 𝗿𝗮𝘁𝗵𝗲𝗿 𝘁𝗵𝗮𝗻 𝘀𝗹𝗼𝘄𝗱𝗼𝘄𝗻
This is the heart of the problem. All macroeconomic indicators are already deteriorating, and none have the necessary flexibility to adjust. In an economy with fiscal and financial reserves, a shock spreads gradually and is absorbed over time.
This is no longer the case today: a new rise in rates or an energy shock would not cause a simple slowdown, but could trigger disruptive effects.
With the simultaneous imbalances and the multiplication of shocks, the engines of growth are lacking while the economy loses its capacity to adapt and its flexibility to adjust.
