After breaking records in April, with more than 5 billion euros collected, the Livret A savings passbook (LDDS) raked in a further 4 billion euros in May, according to figures published by Caisse des Dépôts. Like the Livret A, the LDDS continued to benefit from the confinement that has led to forced savings by households.
A 10-year high
The French have not been spared by the Covid-19 crisis, and most have decided to invest their money rather than consume in order to be able to cope with any unforeseen circumstances. Caisse des Dépôts published the latest figures for withdrawals and deposits on Livret A and LDDS (Livret de développement durable et solidaire) accounts on June 23, 2020.
The Livret A passbook savings account is proving highly successful, with net inflows approaching 5.5 billion euros in April, a record not seen for 10 years. The LDDS, which contributes to the financing of the social and solidarity economy, has also won over the French, with net inflows approaching 2 billion euros over the same period.
Overall, net inflows for these two investments combined totaled more than 5 billion euros in May. Over the first 5 months of the year, they totalled 22.4 billion euros, compared with 13.7 billion euros over the same period in 2019.
Savings frenzy" worries economists
The increase in deposits on Livrets A and LDDS is not due to their attractive interest rates. In fact, the interest rate on these savings products was raised from 0.75% to 0.5% last February. By applying this new calculation formula, Bercy hoped to encourage the French to diversify their investments and, at the same time, enable better financing of social housing.
In normal times, life insurance is the investment of choice for savers. However, in March, this product saw a significant outflow of 2.2 billion euros. The French preferred to deposit their money in passbook savings accounts, a "savings frenzy" that worries economists and public authorities alike. The BPCE group anticipates a savings effort rate of between 17% and 20% by the end of the year. For their part, members of parliament would like to put forward proposals for redirecting French savings towards more productive solutions that finance consumption and investment.
According to several analysts, the decision by households to increase their precautionary savings "illustrates a high level of anxiety". Restoring a climate of confidence is essential if the sums invested are to be used primarily to support the economy. In the long term, the government will have to reassure French people worried about the future.