In Q3 2021, household gross disposable income (GDI) picked up (+0.8% after +0.6%). Earned income accelerated strongly as health restrictions were eased, while at the same time, support measures for households were reduced (short-time working benefits, subsidies paid out of the Solidarity Fund to self-employed workers, etc.). Given the acceleration of consumer prices, household purchasing power per consumption unit stabilised (0.0% after +0.2%).

In Q4 2021, household GDI is expected to increase considerably (+1.7%). Payment of the “inflation allowance” should cause social benefits to rebound substantially (+2.5% after –2.8%). In addition, taxes and social contributions are expected to be nearly stable: social contributions and income tax are set to increase, following on from earned income, but this rise will probably be off set by the continuing reform of housing tax relief (fi rst reduction for the 20% most well-off households). Given the buoyancy of household GDI, purchasing power per consumption unit is expected to bounce back in Q4 (+0.5%).

Across the whole of 2021, GDI is expected to accelerate sharply (+3.9% after +1.0% in 2020), a consequence of the strong rebound in earned income combined with a moderate decline in social benefi ts. Taking into account the rise in consumer prices, household purchasing power per consumption unit is likely to increase by 1.8%, after coming to a standstill in 2020 (0.0%).

In Q1 2022, household GDI is expected to decline slightly (–0.3%). This would be the result of the drop in social benefits (–2.4%) as an automatic reaction to the payment of the inflation allowance the previous quarter. In fact, even without the eff ect of this reaction, benefits are likely to increase slightly, boosted by old-age allowances (increase in the basic old age pension from 1st January) but with a reduction in unemployment benefits (due to several factors, including the drop in the number of jobseekers and the reform of unemployment insurance). Meanwhile, earned income is set to pick up by 0.8%, driven mainly by wage increases in the private sector. These are likely to be less dynamic than at the end of 2021, as a result of the slowdown in payroll employment in Q1 2022. Given the rise in consumer prices (+0.6% after +1.1% as a quarterly variation), the purchasing power of household GDI per consumption unit is likely to fall back more sharply (–1.0%).

In Q2 2022, earned income is expected to increase at virtually the same pace as in the previous quarter (+0.7%), whereas social benefits are likely to rise slightly (+0.3%). GDI should then pick up (+0.5%) with purchasing power per consumption unit expected to rebound slightly (+0.1%).

The mid-year overhang for annual change in purchasing power per consumption unit is therefore expected to be –0.05% for 2022 (this is the annual change that would be forecast if purchasing power per consumption unit remained frozen in Q3 and Q4 at its Q2 level). In fact, this mid-year overhang is likely to be aff ected by the automatic reaction in Q2 2022 to the infl ation allowance, which, in accounting terms, is expected to support household income at the end of 2021. In addition, the mid-year overhang does not anticipate change in purchasing power for the whole of 2022. By construction, it does not take into account possible movements in purchasing power in H2 2022, aff ected by the increase in earned income and the impact of tax or social measures, such as the ongoing reform of the housing tax.