Purchasing Power Drooping After Five Years of Sarkozy

Employment remains the main concern of the French, with 25 days to go before the first round of presidential elections, and the national statistics institute has just shed light on a sometimes confused issue. The right wing affirms that it has increased purchasing power, while the left affirms the opposite.

According to the French statistics bureau INSEE, the purchasing power of gross disposable income per unit of consumption, the indicator that best reflects French experience, increased by 0.4% last year, after having practically stagnated (up 0.1%) in 2010. This is less than what INSEE was expecting, having foreseen 0.6% growth.

This outcome was tarnished by a fall in the second half (down 0.3% in the third quarter and down a further 0.2% in the fourth). In the wake of this erosion, INSEE foresees a further 0.6% fall in the first half of 2012.

In the final analysis, the individual purchasing power of the French rose only by an average of 0.64% a year between 2006 and 2011.

Even Jacques Chirac did better.

In the course of the preceding five-year presidential term, from 2001 to 2006, average growth was twice as high (up 1.3% a year). These figures appear to give the lie to Nicolas Sarkozy, who five years ago promised to be “the purchasing power president” and who, now running for re-election, boasts of an average yearly growth of 1.4% during his term in office, in spite of the economic crisis.

Truncated reality

In fact, it is a question of truncated figures, since the statistic that the government regularly puts forward – 1.32% to be precise, according to the statistics published on March 28 – stems from a far more global measure, the purchasing power of gross disposable income, which takes neither demographic changes nor the make-up of households into account.

For example, with the same income, a couple disposes of a higher purchasing power than two single persons living separately, since the couple shares a number of expenses (household appliances, electricity, etc.). INSEE therefore considers the indicator quoted by the government to be less precise and less reflective of what households experience.

Increased saving

As a corollary of this drooping purchasing power, household consumption, the traditional driving force behind French economic growth, stagnated in 2011, only increasing by 0.3% compared to the previous year, according to INSEE.

A sign of the very great prudence of the French is the fact that their rate of saving last year hit its highest level since 1983, at 16.8%. The lion’s share still goes to real estate, since the household financial savings rate, even though it has risen, stands at just 7.4%.