Inflation in France slows but spreads throughout the economy – 08/31/2022 at 21:25

Inflation in France slows but spreads throughout the economy - 08/31/2022 at 21:25
Consumer price inflation rose to 5.8% year on year, compared to 6.1% in July, according to provisional data published by INSEE (AFP / Aurore MESENGE)

Consumer price inflation rose to 5.8% year on year, compared to 6.1% in July, according to provisional data published by INSEE (AFP / Aurore MESENGE)

For the first time in over a year, price increases slowed in France in August, but inflation spread from energy to other goods and services, and should remain high for a long time.

The rise in consumer prices rose to 5.8% over one year, against 6.1% in July, according to provisional data published on Wednesday by INSEE.

This slight slowdown in inflation is due to “the slowdown in energy prices”, which still gained 22.2% over one year, against 28.5% in July.

The rise in prices is spreading to the whole economy: the prices of food products rose over one year by 7.7% in August, against 6.8% in July.

The same goes for manufactured goods, which increased by 3.5%, against 2.7% the previous month, while services rose by 3.9%, as much as in July.

“It is much too early to speak of a real slowdown in inflation,” notes Charlotte de Montpellier, economist at ING bank, in an analysis note.

Especially since the rise in prices continues to accelerate over one month, rising from 0.3% between June and July to 0.4% between July and August.

Consumer price index (annual change in %) from January 2017 to August 2022 ( AFP / )

Consumer price index (annual change in %) from January 2017 to August 2022 ( AFP / )

On a year-on-year basis, this is nevertheless the first deceleration since July 2021, when inflation was limited to 1.2%.

Has the peak of inflation already been reached, whereas it was rather expected for the autumn? Difficult to say, in particular because of the uncertainties surrounding Europe’s supply of Russian gas this winter.

“No”, answers the Minister of the Economy Bruno Le Maire in an interview with the daily Les Echos. “We do not anticipate a structural decline in inflation before 2023. Our whole policy is to smooth its effects over time,” he commented.

– Great uncertainty –

“The peak, I don’t know where it is, but sustainable inflation is there,” said Carrefour group CEO Alexandre Bompard on Tuesday at the Rencontres des entrepreneurs de France (REF), organized by the Medef.

The Minister of Labor Olivier Dussopt during the Meetings of French Entrepreneurs (REF) organized by the Medef, on August 30, 2022 in Paris (AFP / Eric PIERMONT)

The Minister of Labor Olivier Dussopt during the Meetings of French Entrepreneurs (REF) organized by the Medef, on August 30, 2022 in Paris (AFP / Eric PIERMONT)

“The only thing we know for sure about inflation is what we see rather than what we expect. Inflation will last, but at a lower level than we know,” predicted for his share the Minister of Labor Olivier Dussopt, during the same event.

Thanks to the energy shield which has frozen the rise in regulated gas prices since last autumn and limited the rise in electricity prices to 4% this year, inflation in France is lower than in the other countries of the zone. euro, Bruno Le Maire had again recalled on Tuesday.

In August, prices accelerated by 7.9% year on year in Germany, with a 16.6% rise in food prices, while inflation slowed down a little in Spain, but remained in double digits (10 .4%).

Mr. Le Maire told him that in 2023, energy prices would increase for French consumers, but in a “contained” way.

Also, the inflation differential between France and the other European economies will be reduced or even reversed, according to economists.

The Minister of the Economy Bruno Le Maire during the Meetings of French Entrepreneurs (REF) organized by the Medef, on August 30, 2022 in Paris (AFP / Eric PIERMONT)

The Minister of the Economy Bruno Le Maire during the Meetings of French Entrepreneurs (REF) organized by the Medef, on August 30, 2022 in Paris (AFP / Eric PIERMONT)

Michel Martinez, Europe specialist at Societe Generale CIB told AFP that after the end of the tariff shield, “we will always have lower inflation in France than European inflation. But instead of being three points”, the difference “will rather be of the order of a point”, according to him.

Charlotte de Montpellier is of the opinion that the price index will be higher in France next year than in neighboring countries, because the latter will benefit from a more favorable basis for comparison year-on-year, after an increase in stronger prices at home this year.

Be that as it may, the future evolution of inflation in France, as in the rest of Europe, will still depend a great deal on energy prices, but also on the economic situation as a whole.

Higher gas prices could ‘push up business costs’ which can fuel inflation, but due to weak demand businesses could also be ‘increasingly able to pass on increases costs on prices”, explains the ING economist.

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