Is this the beginning of a lull? After the bad surprise in February, inflation calmed down in France in March, with a rise in consumer prices of 5.6% this month against +6.3% the previous month, according to figures from INSEE published this Friday.
This decline in the level of inflation is above all due, according to the statistics institute, to the slowdown in energy prices. This “is mainly due to lower oil prices than a year ago (they had jumped at the start of the war in Ukraine). This is the “base effect””, advanced on twitter Julien Pouget, head of the business cycle department at INSEE.
Rising food prices
However, the evolutions remain very contrasted according to the sectors. Thus food prices continued to rise. While some retail players were announcing a “red March”, the increase was ultimately 15.8% over one year in March, i.e. a level slightly higher than that reached in February (+14.8%). “Food is now largely the leading contributor to inflation in France,” Charlotte de Montpellier commented in a note for ING France.
This situation spreads its effects throughout the rest of the economy. “This weighs on household consumption”, underlined Julien Pouget, noting that “food consumption in February remained on a downward trend (-1.2% in volume compared to January)”. “Household consumption will not be an engine of economic growth in the first quarter,” judge ING.
Beyond food, the price of tobacco is also on the rise (+7.8%), a consequence of the government’s decision to increase the price of a pack of cigarettes. Those of manufactured goods and services should increase over one year at a rate close to the previous month. Over one month, consumer prices should also see a smaller increase. They should increase by 0.8% in March 2023, after +1.0% in February. This figure nevertheless remains “significantly higher than historical averages”, comments ING, which estimates that “underlying inflationary pressures remain very high in France”.
A rapid decline by the end of the year
It now remains to be seen what the dynamics of inflation will be for the coming months. Even if food prices are still in danger of rising for a few more months, the slight lull noted in March lends some substance to the idea that inflation could soon peak, as claimed by the Minister of Economy, Bruno Le Maire for several months.
A few days ago, the Banque de France had also delivered a reassuring message on this issue of inflation, predicting a marked slowdown in the second half of the year in France. The monetary institute has even revised down its forecasts for the year, counting on inflation of 5.4% on average over the year while it was still considering +6% a few weeks earlier last December.
Bercy’s forecast revised
However, the bill will continue to be high for households, which may continue to weigh on their consumption . Still according to the Banque de France, inflation – excluding energy and food – should still stand at 4.3% at the end of the year.
This faster-than-expected slowdown in inflation would be good news for the government. However, Bercy will still have to darken its own scenarios. Last September, for the development of the 2023 budget, he had adopted a forecast for a price increase of 4.2% over the year, a figure considered “a little low” by the High Council of Public Finances (HCFP).
According to our information, this forecast will be revised upwards for the stability program that it must send to the European Commission during the month of April. On the other hand, this new trajectory of public finances would not include any change in growth (+1%, i.e. a level higher than the consensus of economists) or in the deficit (-5%) despite the better result than expected for 2022.
Household consumption in the red in February
It fell 0.8% in February compared to the previous month, after an upwardly revised rebound of 1.7% in January. This decline is mainly due to a sharp decline in purchases of food and manufactured goods. On the other hand, energy consumption remained almost stable.