Historic Fall in Household Consumption in 2012

For just the second time since 1949, household consumption expenditures fell in volume last year (down 0.4%), the INSEE announced yesterday. The only preceding fall dates from 1993 (down 0.2%). The breakdown of what remains the main driving force of economic activity has thus – alas! – received a spectacular confirmation. According to the latest report from the statistical bureau, the fall results from a fall in net purchasing power (down 0.9%). Even in 2008, the last uptick in the economic crisis, the change in purchasing power remained positive (up 0.4%). Indeed, whereas the cost of consumer spending continued to grow, household gross disposable income slowed sharply. This resulted in an implacable scissors effect. The “freeze” or restraint imposed on wages, tax hikes and unemployment have all impacted heavily on income.

In particular, an analysis by budget item shows, the INSEE points out, that car purchases very clearly fell, by over 10%, a scaling back that has not been seen since 1997. However, “the main budget item that has suffered from the fall in purchasing power” concerns leisure and culture. The statistical bureau especially notes a sharp downturn in book and press purchases, sluggish purchases of cinema tickets, and a continuing fall in sales of materialised sound and video recordings.

On the other hand, but unsurprisingly, “pre-engaged” expenditures (expenditures within the framework of a contract which it difficult to renegotiate in the short-term) – mainly housing, heating and lighting expenditures, which account for nearly 28% of disposable income – continued to grow (up 1.7%).

Food consumption (excluding alcoholic beverages and tobacco) remained constant in volume (up 0.7%) despite prices rising again (up 3.1%). Tobacco spending clearly fell (down 3.8) due to the sharp rise in prices. The same goes for the budget devoted to shoes and clothing, which shrank by 2.3% last year.