French household confidence dips slightly, spending optimism intact

The confidence index for French households saw a slight decline in March, with citizens expressing concerns about their future financial outlook, according to data released by the French National Institute of Statistics and Economic Studies (INSEE).

Despite the dip, the data indicated a growing inclination toward spending over saving, signalling early signs of improvement in domestic consumption.

INSEE reported that the French household confidence index fell to 92 points in March, down from 93 in February, and remains below its long-term average of 100 points - reflecting continued caution among households regarding their economic future.

The index, which is based on household survey responses, showed a marked decline in optimism about future personal finances, with that component of the index falling by 7 points to -11. Confidence in past financial conditions also dipped slightly by 1 point to -21.

Meanwhile France’s public sector budget deficit widened last year but not quite as much as the government had expected, official data showed on Thursday.

The statistics agency INSEE said the 2024 public accounts showed a fiscal shortfall of 5.8 per cent of economic output, up from 5.4 per cent in 2023 but better than the government’s last estimate of 6.0 per cent.

The government had to repeatedly hike its 2024 deficit expectations as spending came in higher than expected and tax income fell short of estimates.

It aims to cut the deficit this year to 5.4 per cent of economic output as a first step towards bringing the shortfall back in line with an European Union ceiling of 3 per cent by 2029.

In terms of general expectations for the French economy, the assessment of future living standards dropped by 3 points to -50, highlighting ongoing concerns about the economic outlook. However, views on recent economic conditions improved slightly, with the index rising by 1 point to -69.

On the employment front, concerns about unemployment showed a significant decrease, with the related index falling by 8 points to 46 - suggesting a modest improvement in the labour market or at least reduced anxiety around job security.

Regarding prices, the number of households that believe prices have risen sharply over the past 12 months declined, with that index dropping by 2 points to -7 - its lowest level since July 2021.

Conversely, expectations of future price increases rose slightly, with that index climbing by 2 points to -41, reflecting persistent concerns about inflation in the months ahead.

INSEE also said that France’s public debt stood at 113.0 per cent of GDP in 2024, compared to 109.8 per cent in 2023 and the government’s expectation of 112.7 per cent in 2024.

Earlier France’s central bank, Banque de France (BdF), announced that it has lowered the gross domestic product (GDP) growth forecast to 0.7 per cent for the whole year of 2025.

After the slight downturn in activity observed at the end of 2024, France’s GDP is expected to grow at a still moderate rate in the first half of 2025 before gathering pace in the second half of the year, the Banque de France said.

“Over 2025 as a whole, activity is expected to slow down but growth should remain positive, at an annual average rate of 0.7 per cent (after 1.1 per cent in 2024),” it added.

In the BdF’s previous estimations published in December 2024, it had predicted that the GDP growth in 2025 would be 1.1 per cent in France.

The French Ministry of Economy announced today that the projected public deficit for 2026, initially estimated at 4.6 per cent of the country’s GDP, will see a slight increase but will remain below the 5 per cent threshold.

The ministry, alongside the Ministry of Finance and Public Accounts, stated that this adjustment will be factored into the preparation of the 2026 budget, which will soon be under discussion.

In October, France submitted its medium-term financial plan to the European Commission, outlining its commitment to reducing the public deficit to 2.8 per cent by 2029, while maintaining the primary goal of bringing it below 3 per cent in accordance with European fiscal rules.

Meanwhile, the French Parliament approved the 2025 state budget in a final vote in the Senate, concluding a legislative process that faced hurdles, particularly after the bill was suspended in December following a regulatory decision by the government of Michel Barnier.

The newly adopted budget includes austerity measures worth €50 billion, aimed at reducing the public deficit to 5.4 per cent of GDP in 2025, down from the approximately 6 per cent deficit expected for 2024.

The Ministry of Economy stressed that achieving this target is “essential”, noting that budget implementation will be closely monitored to ensure compliance with ministerial allocations and to take any necessary corrective measures.