High inflation has already begun to destabilize the most vulnerable households, as shown by the increase in payment incidents and loan repayments. But the financial stress in the face of rising prices is affecting all categories of the population.
+6.1%: the figure for the rise in prices in July, revealed by INSEE in the middle of the summer holidays, has further accentuated the anxiety that has gripped the French since the start of 2022. Everyone is now aware of this: the current episode of high inflation is here to stay, and even risks intensifying, starting this winter, with the sharp rise expected in energy prices.
A cost of living that increases sharply, probably beyond 6% for the year 2022; wages which are also increasing, but to a lesser extent (around 3%, on average, this year): all the conditions are in fact met to assist a almost general deterioration in the purchasing power of households. And so, for those who were already struggling to get by, an accentuation of financial difficulties.
For some, the difficulties are already there. Traces of this can already be found in the statistics of the Bank of France’s Banking Inclusion Observatory, which are now published monthly. Over the first 7 months of 2022, registrations in the national personal loan repayment incident file (FICP) increased by 18%; those in the Central Check File (FCC) by 12%. Clear, more and more households can no longer repay their loans, or have no choice but to make checks and card payments without sufficient funds on their accounts.
Return to normal or leap into the unknown?
From a strictly accounting point of view, these figures nevertheless resemble a back to normal. They even remain slightly lower than the volumes recorded by the Banque de France in 2019 and at the start of 2020, before the health crisis settled, for a time, the financial situation of many households. This observation is shared by La Banque Postale. To MoneyVox, the brand, which has around 40% of its customers financially fragile households, explains that it is currently seeing an increase in the number of incidents [de paiements] (+8% between the first half of 2021 and 2022). But these volumes remain significantly down on the start of 2020 (-6%).
Concern is all the same at Crsus, a network of associations for support and prevention of over-indebtedness. These are the first outbreaks, says Jean-Louis Kiehl, its president. We are still in a period of transition, but a fairly severe crisis is looming. It’s a leap into the unknown.
Credits to compensate for the price increase
There are other signs that financial stress is growing right now. This is the case, for example, of the strong increase in the production of personal loans (+34%, compared to 2021, over the first 5 months of the year according to the French Association of Financial Companies) and renewable credits (+35%). Spectacular figures, which the catch-up in consumption, following the exit from the acute phase of the health crisis, are not enough, according to him, to explain: Personal loans are also used to compensate for the rise in prices, which is unhealthy and will lead to an increase in failures.
Added to this is a new phenomenon: the appearance, in the cases handled by Crsus, of new forms of credit: deferred or split payments (which are often referred to by the acronym BNPL, to Buy Now, Pay Later), or even salary advance services. We see appear of households that have 5 BNPL in progressare no longer able to repay and are exposed to significant arrears, explains Jean-Louis Kiehl, who is impatiently awaiting the establishment of rules of the game. They should arrive, within the framework of a future European directive, but not before 2023. In the meantime, the policeman of the financial sector alerted this summer to the practices of players in this booming market: +40% for split payments, between the first quarters of 2020 and 2021.
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Financial stress that concerns all categories of the population
While it is already very concrete for already weakened households, financial stress today affects much broader categories of the population. That in particular of property owners, who believed themselves to be sheltered, but observe with a certain anguish the effects of the current crisis on their budget, their heritage, even their employment.
The results of the Worldpanel of the Kantar Institute (1) already showed it last June. Even preserved households suffer from the sharp rise in prices: this is the case for nearly 61% of them, a figure up 40 points in one year. Among these households, often urban and with comfortable incomes, nearly 6% say they can’t make it (+2.5 points in one year), against 7% for pragmatic households, those who count, but manage, and 17.6% for the vulnerable.
A finding shared by another study, the one recently unveiled by onepoint and devoted to the relationship between banks and the French (2). 83% of respondents say they are experiencing a drop in purchasing power. A feeling that transcends generations and socio-professional categories, comments Baudoin Choppin de Janvry, Partner Bank at onepoint.
In this context, the French are looking for solutions and rely in particular on their main financial partner to avoid going under: half of them are awaiting enhanced support from their bank. And, dj, of a certain indulgence: according to our exclusive survey (2)carried out in partnership with the YouGov institute, 51% of those questioned anticipate a more frequent use of overdrafts in the coming months.
EXCLUSIVE. Inflation: one in two French people are afraid for their budget
(1) Kantar Worldpanel – Cumulative 4 weeks based on 1,000 respondents from the Promthe Panel, June 2022. (2) Harris Interactive survey for onepoint on the relationship between banks and the French, in May 2022 among 3,241 customers individuals from French banks representative of the national population, online interviews.