Household spending on goods jumped 36% in May with deconfinement, Insee announced on Tuesday. This bodes well for growth in the coming quarters.
The French have started consuming again with deconfinement. So far, nothing surprising after two months of store closures and almost impossible to travel. Except that the increase in the consumption of goods in May was much stronger than what economists expected. And that bodes well for economic activity in the coming months.
In May, household consumption rebounded 36% from April, INSEE reported on Tuesday. There is certainly something mechanical about this rebound, and consumption remains 7.2% below its February level. But it should be remembered that the deconfinement only took place on May 11. During a third of May, the French were therefore unable to spend as they wanted.
“Remarkably fast” recovery
“As this catching-up focused on the last two weeks of May, this means that at the end of the month, household spending on goods returned to its pre-crisis level”, indicates Julien Manceaux, economist at ING who judges the recovery “Remarkably fast”. For him, “This rebound could ease the contraction of GDP in the second quarter of the year and could, if it continues, point to a rapid catching up in the third quarter”.
Household morale has also almost returned to its long-term average in June according to INSEE, and the French will have set aside nearly 75 billion euros between March 17 and July 5 according to the French Observatory. economic conditions (OFCE). French optimism and accumulated savings that could fuel strong consumption by the end of the year.
Almost normal in June
However, not all sectors benefited from French purchases last month. Thus, while housing equipment spending has returned to its February level, textiles and clothing, durable goods such as transport equipment, have remained well below consumption this winter. But, according to the OFCE, from June 2 to July 5, household consumption should approach its pre-containment level. It would be only 5% lower than that of the months preceding the appearance of Covid-19 in France.
Economists at Citi Bank expect consumption to drop 46% in the second quarter from the previous three months, following a 20% decline in the first quarter. It should then jump almost mechanically this summer by 68%.
No sign of inflation returning
In the meantime, prices are stagnating. Over one year, consumer prices rose by only 0.1% in June, according to the first estimate from INSEE published on Tuesday. The price of fresh products and tobacco are rising but those of manufactured products are falling, especially as China, which is facing economic difficulties, has tended to reduce the price of its production since the beginning of the year. Above all, the price of oil is still well below its pre-crisis level.
For now, despite the ECB’s ultra-accommodative monetary policy, there is still no sign of inflation returning. The pandemic and containment fueled unemployment and therefore depressed prices.