Private consumption in France – Stubbornly high, or responsive to determinants

This Country Focus studies the development of private consumption in France during the decade before the crisis.

Are French consumers greater spendthrifts than their European fellows? In this paper, the authors estimate a consumption function to show that strong growth of private consumption in France during the pre-crisis decade is explained by the main determinants identified in the literature: real disposable income and wealth. They highlight the role of employment and wage policies in supporting households disposable income throughout the decade. During the crisis, private consumption was sustained by the working of the built-in fiscal stabilizers and stimulus measures. As the latter are being withdrawn, private consumption growth may lose its vigour in the coming quarters.