Inflation will begin to decline by the end of June, according to INSEE

2023-05-05 10:33:47

Weak growth combined with persistently high inflation is what awaits France in the coming months. In a note on the economy published on Friday, INSEE nevertheless indicated that it was counting on a slight decline in price increases by the summer. “By mid-2023, the annual shift in consumer prices in France could decline slightly thanks to base effects on petroleum products,” writes the institute. After a rebound in April to 5.9% (against 5.7% in March), the pace of inflation should slow down to 5.4% in June – a forecast unchanged from that delivered in March.

However, the statistics institute warns: this slight decline “does not presume its evolution during the second part of the year” because “strong uncertainties remain”, in particular on the evolution of food prices and services. .

Another price jump in May

For the moment, in the food departments, the waltz of labels continues. According to INSEE, a new jump in prices is even expected in May, food inflation would reach 15.8% over one year before landing at 15.5% at mid-year.

Although agricultural prices have been falling for several months, “the producer prices of the agri-food industries do not show any inflection at this stage” observes the institute. Hence the pressure put by Bercy so that the industrialists of the sector and the retail brands reopen the negotiations and pass on the fall in the price of raw materials. Furthermore, the prices of services are also accelerating, driven by wage increases (+3.5% expected in June).

The impact of the rate hike

For the time being, the persistence of inflation despite monetary tightening is weighing on French morale and purchasing power. On the other hand, the rise in interest rates is already beginning to slow down economic activity. This Friday, INSEE reiterated its forecast for GDP growth of 0.2% in the second quarter, similar to that of the first three months of the year.

Already down in the first quarter, consumption should continue to dive. Held back by the rise in the cost of money, investment in real estate by households and especially by companies should also cease to support growth. Activity should thus continue to decline in construction, and be sluggish in trade. On the other hand, it should progress “slightly” in the other services, transport in particular. At mid-year, the growth overhang would be 0.5%, according to INSEE.