Sunday, February 04, 2007

France Having an Invisible Cost-Of-Living Crisis?

I have now seen four sources of information that worry me about the French economy, or at least their standard of living and/or their inflation statistics, in spite of all of the positive news one reads about Europe, its real estate market, and the Euro.

According to a report from the Fondation Abbe Pierre, France has approximately 8.5 million people who are experiencing difficult housing circumstances. That's 13.5 percent, out of 63 million. (Source.)

Abbe Pierre
[Thanks to for the photo of the well-known homeless advocate and priest, Abbe Pierre, who died recently at over 90 years old.]

They differentiate between the 3.2 million who are poorly housed (homeless, occupants of haphazard and temporary shelters, or living in government- and private-charity-funded "social insertion centers"), and the 5.2 million who are living with others in crowded apartments or who are in the middle of eviction proceedings for unpaid rent.

For comparison, taking only the 3.2 literal homeless which is 5 percent of the French population, the US has between 2.3 million and 3.5 million homeless people (Source) "experiencing homelessness," or between 0.76 percent and 1.16 percent -- assuming we have the same basis for comparison, which we may not, of course.

(By the way, don't you just love that politically correct, positively turned phrase "social insertion centers"? Sounds much more optimistic than our more frank but depressing "homeless shelters." I can't help but wonder if the end result isn't about the same no matter how much positive spin you put on the name.)

Another source of disquieting information was a French documentary series I saw last week, about how the French purchasing power has decreased drastically over the last several years. In this TV news report, I saw how French university students and ordinary families are having to tighten their budget belt just in order to survive. For students who have to find both lodging and food with only a few hundred euros a month (remember, most of the tuition is government-provided), they are now forced to (or are choosing to, which I wouldn't have done unless I were forced to) line up in charity food lines to help themselves make it through.

As for families, between the take-home pay and government subsidies, they cannot afford to cover even the relatively small expenses of their university-age children. I don't know the true statistics, and pictures always say more than words and data; but still, I found that the documentary raises some valid issues, especially in light of the following:

A third source of my worry comes from actually having visited France over the years and knowing several French families quite intimately. Life is not easy. There is a general feeling of growing frustration at what seems to everyone I've met to be an obvious and unfair inflation of prices, without the corresponding increase in salary. Can all those people be wrong?

The French INSEE (Institut National de la Statistique et des Etudes Economiques) publishes the official inflation and other figures, and according to these, inflation is tame. However, both the Socialist and the Capitalist political parties, which are vying for the public's vote in this year's elections in April, are claiming that these figures are misleading; and they are doing so because the public perceives this to be true.

The fourth source of my unease is the INSEE figures on consumer confidence. You will note from the following chart that the INSEE's positive statements about French consumer sentiment are belied by the figures. (Click on the chart for a larger version.)

[Thanks to the INSEE for this chart.]

The INSEE says:

"In January 2007, the household opinion indicator, corrected for seasonal variations, is righting itself. The net opinion of households concerning buying opportunity has rebounded in January. [sic] ... Households are more optimistic on the perspectives of the evolution [of their standard of living.]"

When you look at the actual chart, you see that French consumer sentiment has moved from -27 to -24. Now that's progress, wouldn't you agree? In fact, if you'd like a laugh or two, look at the chart carefully. The figures range from 28 to -63, and the great majority of the figures are negative.

(Source: Institut National de la Statistique et des Etudes Economiques. Note that the figures are calculated by taking the net difference between the percentage of positive responses to a number of questions, and the negative responses. The five major indicator categories are: (1) Personal financial situation - Past evolution; (2) Personal financial situation - Perspectives for evolution; (3) Buying opportunity; (4) French standard of living - Past evolution; and (5) French standard of living - Perspectives for evolution.)


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