Lucie Barette – Hello, everyone, and welcome to another episode of Macro Waves, the BNP Paribas Economic Research podcast. Today, we're looking at household consumption, which remains the main driver of growth in both the Eurozone and the United States. As we all know, household consumption suffered a major negative shock during the COVID-19 pandemic. Since then, growth has remained very moderate in the Eurozone, while it has accelerated sharply in the United States. After the pandemic, the inflationary crisis and contrasting economic policies of recent years, where do we stand on either side of the Atlantic?
I'm Lucie Barette, economist specialising in the Eurozone, and today, I'm joined by two of my colleagues from the Advanced Economies team, with whom I had the pleasure of publishing an Eco Insight on this subject a few weeks ago: Anis Bensaidani, United States specialist, and Stéphane Colliac France specialist. Good afternoon to you both, and thank you for being with us today.
Stéphane Colliac – Hello.
Anis Bensaidani – Hello, and thank you, Lucie, for that introduction. Let's start with the main contrast. From 2021 onwards, the negative impact of COVID on household consumption has been swiftly offset in the United States. In the Eurozone, however, the situation has been different and consumption has remained sluggish. What is behind this initial divergence?
Lucie Barette - In the Eurozone, the moderation in household-consumption growth in the post-COVID period has mainly been due to the poor performance of the variables underpinning it. These variables are known as fundamentals, and include households' real gross disposable income, their real housing and financial wealth, and the real 10-year interest rate.
More specifically, we have found that the growth of real financial wealth has slowed markedly compared with the pre-COVID period, as has that of housing wealth.
Therefore, overall, the savings rate has remained well above its pre-COVID level in the main Eurozone countries. This is due to a more favourable trend in the purchasing power of disposable income (or GDI) than in wages alone. This dynamic has had redistributive effects that have increased the savings rate.
Anis Bensaidani - I imagine that not all Eurozone countries have experienced the same trends in terms of consumption and savings. Stéphane, can you tell us whether you have observed a high degree of cross-country heterogeneity?
Stéphane Colliac - Yes. The savings rate has risen everywhere, but not to the same extent or for the same reasons. The biggest increase was in France, which has been driven in particular by the savings behaviour of older people. Their incomes have been better protected from inflation, particularly pensions and property income, while, on the other hand, wages have not kept pace with inflation, which has weighed on household consumption. Wages have also lagged behind inflation in other countries, and this has been particularly detrimental in Germany, where inflation has been almost 5 points higher in cumulative terms than in France or Italy, which has affected the consumption of less well-off employees.
Lucie Barette - I'd now like to turn to you, Anis. Can you explain what has happened in the United States?
Anis Bensaidani - Sure. In the United States, contrary to what we are seeing in the Eurozone, consumption growth has been maintained. Our model, based on the same fundamentals as those given earlier for the Eurozone, explains this trend fairly well. Nevertheless, we note that these variables alone have not been sufficient to explain the dynamism of US consumption. So, we think that changes in behaviour have occurred since the pandemic.
Lucie Barette - That's very interesting, because it shows that, compared with the fundamentals, European household consumption has underperformed, while US household consumption has outperformed. Anis, what has happened in the post-COVID period that could explain this outperformance in US consumption?
Anis Bensaidani - There are two possible answers to this question. The first, chronologically, is the massive scale and nature of the fiscal policy response to the COVID-19 pandemic, which included direct financial support for households. The various support and stimulus packages led to the build-up of excess savings, which sustained consumption for a long time, as households did not deplete them until early 2024.
The second is a change in behaviour. According to the IMF, the marginal propensity of Americans to consume housing wealth has almost tripled in the post-COVID period, and the adjustment of our model by this factor proves conclusive. This result helps to explain why it is the wealthiest households that are driving the recent growth in consumer spending.
Stéphane Colliac - Let's now turn to the outlook for the coming quarters. Is the era of US outperformance coming to an end?
Anis Bensaidani - In our view, US outperformance is likely to lose momentum, but without tipping over into underperformance. This moderation is expected for several reasons. Firstly, at an aggregate level, the decline in population growth will have an impact on consumer spending. Secondly, the balance between inflation and employment has turned less favourable to households. Inflation is on the rise again and is unlikely to return to target before at least 2028. At the same time, the labour market has cooled markedly, with a decline in payroll growth and in the ratio of job vacancies to unemployed people, which contrasts with the post-pandemic situation that supported wage catch-up.
Finally, the administration's fiscal policy is based on the One, Big, Beautiful Bill Act (OBBBA), which adds no stimulus, and on tariffs, which have an upward effect on inflation. Moreover, the OBBBA extends a tax system that favours the highest incomes, while tariffs are borne disproportionately by the lowest incomes. Under these conditions, its fiscal policy is not redistributive and appears unfavourable to consumption.
Stéphane Colliac - Now I’ll turn the question back to you Lucie. In the Eurozone, can we finally expect this rebound in consumption?
Lucie Barette - We are indeed expecting a rebound in consumption, but it still vary from country to country. Germany and Italy could see their savings rates wipe out the post-COVID increases by 2027, supported by improved growth prospects and, in Italy, by income tax cuts for the middle classes. Spain would maintain a high savings rate thanks to sustained growth in gross domestic product, allowing dynamic consumption without dissaving.
Anis Bensaidani - What about France, Stéphane?
Stéphane Colliac - In France, household consumption growth slowed further in 2025, probably to 0.4%, according to our estimates. The inflationary period, which ended 2 years ago, has been replaced by a heightened fear of rising unemployment, as reflected in the INSEE household confidence survey. However, unemployment rose only moderately, to 7.7% in Q3 2025 from 7.4% a year earlier. This relative resilience in the labour market helped to begin to dissipate fears of unemployment in the second half of the year. This should lead to an improvement in household-consumption growth, which should return to a growth rate of 1% per annum from 2026 onwards, more in line with the income dynamics that have been at play since the 2nd half of 2024, with wages once again rising faster than inflation.
Stéphane Colliac - In conclusion, then, we are witnessing normalisation. The Eurozone is gradually correcting its underperformance, and the US is moderating its outperformance.
The key points are as follows:
- In the Eurozone, consumer spending should rebound, but unevenly, with countries such as Spain better positioned than France or Germany.
- In the United States, the outperformance is running out of steam, with risks linked to inflation and the labour market.
So, here's a final question for you both: what are the main risks that could upend these scenarios?
Anis Bensaidani - In the United States, consumption is more dependent on the wealth effect than in Europe. As a result, its growth is vulnerable to a sharp correction in stock market valuations which, driven upwards by the "Magnificent Seven" in the tech sector, are historically high.
Lucie Barette - In the Eurozone, these uncertainties appear to be more balanced. However, the latest economic indicators confirm a marked improvement. Although still high, European households' fears about the labour market have recently eased and could continue to do so, with the labour market proving resilient. On the other hand, the moderate rebound in real wages (after a fall during the inflationary period), and the continuing relatively high level of uncertainty, could have a downward effect on the prospects for a recovery in household consumption in Europe.
Stéphane Colliac - Thank you both for that insight. And thank you to our listeners for tuning in. You can find the full report in our latest EcoInsight, entitled “Household consumption: heading for a rebound in the eurozone and a slowdown in the United States?”. Visit the BNP Paribas Economic Research website! All of the links are in the description. See you soon for a new episode of Macro Waves.
Read our EcoInsight on this subject: Household consumption: Heading for a rebound in the Eurozone and a slowdown in the United States?
