Inflation slowed in September, to 5.6% over one year, according to figures published this Friday by INSEE. This decline in inflation is due to the “slowdown” in the rise in energy and services prices, explains the National Institute of Statistics in a press release, while the rise in food prices is accelerating and that that of manufactured products is continuing at a rate close to that of the previous month.
After August, this is the second slowdown in consumer price inflation in France year-on-year since July 2021, when inflation was limited to 1.2%.
Over one month, consumer prices fell back by 0.5%, after +0.5% in August. “For the third consecutive month” energy prices fell “in the wake of oil product prices”. The increase over one year is 17.8%, against +22.7% in August.
In mid-September, the Minister of the Economy Bruno Le Maire had stressed that the gradual withdrawal of support systems (fuel discount, increase in gas and electricity prices by 15% on January 1, 2023) would result in inflation “high” in “December, January, February 2023”. “We do not expect any improvement on the inflation front before sometime in 2023,” he said.
At the same time, household consumption of goods in France remained stable in August compared to the previous month, after a drop of 0.9% in July, underlined the National Institute of Statistics and Economic Studies (Insee). . “The increase in expenditure on manufactured goods (+1.2%) is offset by the drop in food purchases (-1.0%) and, to a lesser extent, by the decline in energy consumption (-0. 4%),” added INSEE.
However, compared to our European neighbours, France manages to limit damage. Annual inflation in the 19 eurozone countries rose again in August, standing at 9.1%. It was even 10.1% for the whole of the European Union.
“Too high inflation is poison for democracies”
In France, the capping of energy prices and the amortization of prices at the pump have thus made it possible to partially limit this galloping inflation. Still, these measures are very expensive and have the effect of increasing the debt.
In presenting the 2023 draft budget, Bruno Le Maire, the Minister of the Economy considered “that too high inflation is poison for democracies” and declared that the fight against rising prices was the main challenge of the moment. for France as well as for Europe. “Since autumn 2021, we have adopted an energy shield which has kept electricity and gas prices at reasonable levels. This has allowed us to maintain the lowest level of inflation of the eurozone countries,” he added. INSEE estimates that without this cap, French inflation would have been 3.1 percentage points higher than its current level (6.6% over one year in August compared to 8.8% in Germany and 9.9% in Britain).
Still, the various aids to fight against inflation (energy vouchers, revaluation of the minimum wage, increase in retirement pensions, etc.) will lead to an increase of around 85 billion in public spending.
In these conditions and the longer the crisis lasts, the more the government’s room for maneuver will be reduced to a trickle. For 2023, Bercy has already planned an increase in gas and electricity even if it is still limited to 15%. Ditto for the discount on prices at the pump which should in principle disappear on 1 January.
However, by reducing this aid, the risk is to witness a new inflationary outbreak in the coming months, which would cause us to plunge to the same level as our European neighbours.