France: The Beleaguered Consumer Hit Further by Fiscal Impasse
As France’s political deadlock intensifies amid a likely toppling of the fledgling government, markets are worried about the fiscal fall-out of what may at best be emergency legislation, a so-called Special Law that would keep the country running, but with funding approved month by month. To some degree that is exactly what is happening at present as no Budget for 2025 has been passed or seems likely to be. But perhaps the most marked impact is on confidence and then on spending (Figure 1). Business surveys have highlighted how fragile is the situation among French firms. But perhaps the most marked fragility is that seen on consumer surveys.
Figure 1: Consumer Dissatisfaction Hitting Spending Already?
Source: INSEE
According to a very recent poll in Le Monde, the consumer mood h is gloomy where discontent is very much above 50% Indeed, the survey notes that only 3% of French people surveyed said they were "satisfied or appeased," a feeling shared by just 10% of President Macron's own supporters, down from 37% in 2021.
Notably this suggest that the political limbo in parliament is both a reflection of and Cause of electorate distrust, but the interesting thing is the extent to which the opinion poll suggest that this drop in satisfaction has only been in part to the shock of the parliamentary dissolution ahead of the shock July election but more resounded within the electorate, not last among Macro sympathizers. The question this raises is the whether the divided political backdrop realises that leaving the fiscal blow-out unaddressed may only alienate the electorate further and with economic consequences given the clear and understandable correlation between household sentiment and spending (Figure 1).