Price rise continues its strong progress in France . In June, it reached 5.8% over one year after 5.2% in May, according to the provisional estimate published on Thursday by INSEE.
Driven by the war in Ukraine, the prices of energy and food products continue their race forward: they are respectively up by 33% and 5.7% over one year. But beyond that, inflation spreads through the economy. The prices of services thus rose by 3.2%, as in May. Overall, the prices of manufactured goods rose by 2.6%, a more moderate rise than in May, essentially linked to the start of the summer sales.
“Year-on-year, inflation is nearly four times higher in June 2022 than it was a year earlier,” observes Sylvain Bersinger, economist at Asterès.
France may be less affected than its European neighbors – with a price increase of 6.5% in Eurostat data – but the shock is severe.
6.8% in September
And the price escalation is far from over. “We estimate that this inflationary peak will begin to decline in mid-2023,” indicated the Minister of the Economy, Bruno Le Maire, in an interview with “Les Echos” this week. In its latest forecasts, INSEE predicts that inflation will climb to 6.8% in September before stabilizing between 6.5% and 7% at the end of the year. “We are losing control over inflation! » is alarmed Patrick Artus, economic adviser at Natixis, worried « about the risk of recession in 2023 in the euro zone if the European Central Bank has to tighten its policy to combat it ».
After having already committed the equivalent of 25 billion euros in support measures to cushion the shock of inflation, the executive detailed this week the provisions provided for in its “purchasing power package”: revaluation of 4% pensions and social minima, 3.5% increase in index point officials, etc. All at a cost of around 25 billion as well.
“Significantly increasing revenues in turn risks fueling inflation and widening the public deficit,” notes Sylvain Bersinger. Faced with this “delicate dilemma”, the government “should above all target households in difficulty”, believes the economist.
The extent of inflation and the speed at which it is spreading are weighing on purchasing power and are now affecting French morale. For the sixth consecutive month, the INSEE indicator measuring household confidence fell in June to fall to 82, well below its long-term average. You have to go back to 2008 and 2013 to have seen it sink so low. Households are pessimistic both about their future situation and about the opportunity to make major purchases.
Savings of 319 billion euros
Cautious, they continue to fill their stockings , but much less than during the health crisis, the soaring prices undoubtedly limiting their room for maneuver. According to the Banque de France, the surplus of financial savings only increased by 2 billion euros in the first quarter while it had increased by 7 billion in the second half of 2021. Now, the total savings of the French people reach 319 billion.
A “reservoir” of expenditure which could support growth – which has just been reduced to 2.5% in 2022 by the executive – if they chose to draw on this kitty. So far, that’s not really the case. In May, household consumption, in goods and in volume, certainly started to rise again, by 0.7%, but after five months of decline. And over one year, it fell by 3.4%.