Purchasing power in France set to improve in 2025
‘The inflationary episode [of 2021-23] is well and truly behind us’, one economic expert says
Some food prices may continue to rise despite overall falling inflation, experts predict
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Spending power in France is set to improve in 2025, with economic predictions forecasting a much lower level of inflation than in the past two years, and a fall in some prices and fees.
It comes after 2024 saw a lower overall rate of inflation, at 1.3% over the 12 months, compared to 4.9% in 2023, and 5.9% in 2022, per figures published on January 7 by the French statistics and economic bureau INSEE.
A drop in the rate of inflation, combined with sufficient wage growth, makes the cost of living more affordable.
The downward trend in the rate of inflation is forecast to continue in 2025, INSEE estimated in its latest Economic Outlook, of December 2024. This stated a predicted 1% rise in the price index in June 2025, well below the 2% target set by the European Central Bank as the benchmark for price stability and manageable growth.
This is accompanied by an improvement in purchasing power, said the director general of INSEE, Jean-Luc Tavernier. “Not everyone is fully aware of it, but in 2024 [final statistics will show that there was] an increase in the purchasing power of French households,” he told France Inter on December 23.
Estimates suggest that purchasing power “per consumption unit” (per adult in a household) increased by 1.5% in 2024, after just 0.3% in 2023.
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‘Inflationary episode’ years
Inflation began to rise in France and most of Europe in autumn 2021, due to the effects of the Covid-19 pandemic; accelerating sharply after Russia’s invasion of Ukraine in 2022.
Certain markers of inflation were very apparent, the Observatoire français des conjonctures économiques (OFCE) said. Between November 2021 and November 2024, wages rose by 11%, but prices rose by 13%. Plus, the two major drivers of inflation, energy and food prices, soared by 21% in the same time frame, it stated.
Now, “the inflationary episode is well and truly behind us”, said Mathieu Plane, deputy director of analysis and forecasting at the OFCE, to Le Monde. Falling energy prices in 2024 have enabled France to emerge from the inflationary crisis “a little earlier than expected”, he added.
It comes after economists had previously predicted that high inflation would continue into 2025 or even 2026.
Some inflation rates to increase
Some prices or inflation rates may still continue to rise in real terms in 2025, INSEE said.
Food inflation specifically may increase slightly due to the still-high cost of certain raw materials (e.g. cocoa, coffee…), the bureau stated, predicting a possible rise from 0.2% in November 2024 to 1.1% over one year by June 2025.
Food prices also depend considerably on the outcome of major supermarket negotiations that happen every year in early spring.
Read also: Why food prices are at risk of rising again in France from March
The cost of other services - such as insurance and train fares - may also be slower to fall (as they were slower to rise during the high inflation period). In the year ending December 2024, price rises for this category were some 2.3% - higher than overall levels of inflation.
Similarly, one of the most obvious signs of a drop in inflation will be a parallel drop in the rate on the Livret A saving accounts, which are held by 82% of people in France. This rate has been fixed at 3% since February 2023, but because its rate calculation takes into account inflation, a downward trend in inflation is likely to see a drop.
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The rate will probably be set at 2.5%, said the new Economy Minister Eric Lombard, to France Inter on January 6.
The Economy Ministry may suggest a “boost” for the Livret d'épargne populaire savings account, to send out a positive signal to savers of more modest means. The interest rate for this type of account is also calculated on the basis of inflation.
