Household consumption, a glimmer of hope in the coming economic crisis

We know that we are heading towards a difficult return to the Economic level, but in this very bleak picture, a thinning could partly save the public accounts: household consumption. The good news is that we have almost returned to pre-crisis consumption levels. We are still 3 points below normal but it is much better than the catastrophic scenarios developed in full confinement. If we look at the amount of our expenses with a credit card, we spent almost as much as in June 2019. And above all, according to INSEE, this dynamic concerns both physical stores and online payments. This means that we almost start shopping like before. It must be said that the French saved a lot during the confinement: 60 billion euros. And we should reach 100 billion by the end of the year. This is the famous forced savings. Then the big question when the country was stopped: it was to know if once the freedom found the French were going to play the cicadas or the ants. They partly play the cicadas, they seem determined to sing all summer long and it is essential for the economy. Even if the French will also play the ants and keep a large part of this savings like a woolen stocking to face the difficult months that await us at the start of the school year ... and probably until 2022. The cicadas will not save public accounts, unfortunately it would be difficult, but let's say it could boost the state budget a little. Firstly, because when we consume, we create activity, we limit the loss of employment and we encourage the return of social security contributions. But mainly because, when you consume, you pay VAT. However, VAT is the main source of income for the budget, it is even half of the state budget. We are still talking about income tax but income tax is 75 billion euros per year. VAT brings in almost twice as much: 126 billion euros. So in the middle of a crisis, we could have been tempted to lower the VAT to revive the economy. Other countries have done so, Germany has gone from 19 to 16% and from 7 to 5% depending on the products. The same goes for Greece which has reduced the VAT on food products, catering and energy. So it's great if you plan to spend your holidays in Greece, it means that everything will cost less. But it is a shortfall that could weigh very heavily on the country's budget. In France, we have chosen to bet on household consumption, even without lowering the VAT. For now, the bet seems to be successful and it's always that to win for the next budget.