Weekly Update - Savings: a massive wealth effect in the United States compared with France

The sharp rise in energy prices, in the context of the continued blockage of the Strait of Hormuz, is already Household wealth can increase in two ways: through savings efforts or through the revaluation of the assets held. A comparison between the United States and France reveals a seemingly paradoxical finding: the French save more, yet their wealth grows only modestly. Americans save less, but see their wealth increase much faster. This substantial wealth effect provides strong support to consumption and, ultimately, to economic growth in the United States.

French ants and American grasshoppers. Since the Covid crisis, savings behavior has diverged on both sides of the Atlantic. According to harmonised OECD data, the US savings rate currently stands at around 10%, compared with about 12% on average before the pandemic. In France, it reaches 17.5%, versus less than 14% before 2019.

Several factors may explain this gap: a more dynamic labour market in the United States leading to stronger household income growth, as well as a degree of caution among French households in the face of political instability, etc. However, the most decisive factor likely lies in the evolution of wealth itself.

A strong rise in financial assets in the United States. Since Covid, US household financial wealth has increased by 70% in nominal terms, or around 40% in real terms, that is, adjusted for cumulative inflation. In France, financial wealth has grown by just over 20% in nominal terms, or roughly 5% in real terms. This difference reflects both a much higher exposure of US households to equity markets and significantly stronger market performance in the United States compared with Europe. Mechanically, this positive wealth effect reduces the need for US households to save more.
It should nevertheless be noted that the ownership of financial wealth remains highly uneven in the United States, and as a result, these wealth effects observed at the aggregate level benefit only part of the population.

A strong support to the US economic cycle. the United States, despite a moderating labour market and rising inflation, the wealth effect continues to support consumption and cushion the cyclical slowdown. It thus acts as a powerful stabiliser, often underestimated in traditional macroeconomic models.
In France, the gradual deterioration in household conditions does not benefit from the same buffer. Weaker wealth effects mechanically limit support to consumption, depriving the economy of this important driver.

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