French Shop As Germans Save

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This just about sums it up:

French shoppers, scarcely distracted by riots in March, increased spending significantly in the first quarter of this year, with purchases of household durable goods soaring, official data showed on Friday. The robust spending growth is almost certain to have helped eurozone economic growth rebound in the first quarter of 2006.

Meanwhile:

the outlook for German consumer spending remains poor – highlighting the underlying weakness of the eurozone economy…..German households have been hit by falling real wages and house prices. Germans have also continued to save at a furious pace because of their fears about the future of the welfare state.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

10 thoughts on “French Shop As Germans Save”

  1. The German household savings rate went from more than 13% in 1991 down to 9% in 2000 and then rose again to about 11% today.

    I don’t think you can say 11% is “a furious pace” given that context.

    Sure, if savings went down to below zero as in the USA consumption would improve, but I don’t think that is the problem. It’s investment in Germany that is low, thus a “normal” savings rate causes a current account surplus.

  2. “It’s investment in Germany that is low, thus a “normal” savings rate causes a current account surplus.”

    Nope, the German problem isn’t lack of investment, it’s lack of growth in domestic consumption (which leads in its turn to less investment for a stagnant internal market. This is an ageing problem).

    In France, which is younger, domestic consumption is more or less fine (or at least *average*). In fact, in Eurozone terms, France is M. average.

  4. I’ll repost my question here about Brad argument that the housing boom has effects on consumer spending in France like in the USA:

    I still fail to see how the average french houseold can take advantage of the housing boom as much as their counterpart abroad can do since up to a few weeks ago it was quite hard to legally extract money from your house.

    So far no answer 🙂

  5. Even in the US getting a second mortgage isn’t the norm. But high house prices make people feel secure enough not to save money in other vehicles because when real shit happens they can get money by selling the house

  6. Let the French shop and German save. Their shopping power has increased tremendously leading to economic growth.And German spending power remains poor leading to weakening of economy. They r already hit by the falling real wages and house prices.Its nice to save for the future.

  7. Let the French shop and German save. Their shopping power has increased tremendously leading to economic growth.And German spending power remains poor leading to weakening of economy. They r already hit by the falling real wages and house prices.Its nice to save for the future.

  8. Edward,

    the French birthrate may be higher, but I donn’t think that the *current* demographic situation is sufficiently different to explain the different attitudes.

    The article puts it rightly, Germans are scared and believe they’re powerless and on their own facing globalisation individually (which is not a strange reaction given the political discourse in the last 10 years) while the French are possibly equally scared but still believe they won’t be on their own – for all the lack of immigration rethoric, the myth of the French community is reinforced everytime some group is taking their issue to the street. So, in a bizarre twist, I think the demonstrations were a confidence booster.

  9. Its all about shopping and saving leading to growth of one and weaking the other one. What will they do after the fall of real wages and house prices. Its time to save!

  10. If somebody is really hit by the falling prices and house prices,then saving is the right decision for them. So the Germans r doing exactly what they r likely to do in such a situation.

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