2023-06-29 19:16:56
And now it’s the turn of services. Rents, transport, personal services, insurance contracts, leisure, etc. These items of household expenditure are “joined the dance” inflation in France, which «could be in the process of to change nature, deciphers Julien Pouget, at Insee. “After the (imported) rise in energy prices in the fall of 2021, logicallyfollowed in 2022 of the lives augmentation food prices, services could in turn become the main contributor to inflation In France “continues the expert, while the institute must publish this Friday, June 30 its first estimate of the consumer price index for the month of June.
In other words, the label waltz has indeed entered its third season. If a first decline in the index appeared in May, this does not mean that prices will fall over the next few months. Food prices will undoubtedly increase more slowly, of course, but they could still continue to climb.
“Diffusion takes place via wage increases”
At this stage, the waltz of labels in services (around +3% over one year) remains far behind food (14% currently). This third wave is no less remarkable. “Firstly because services represent half of the household consumption basket”, emphasizes Denis Ferrand at COE-Rexecode. The impact of this new inflation will therefore be felt on their budget. And then, adds the economist, “this inflation is not of imported origin; it is the result of wage increases in France because services are very labour-intensive”.
An analysis shared by Olivier Passet, at Xerfi. “There is clearly a diffusion of inflation, whose natural orbit is now between 4 and 5%, even if the most volatile components of the rise in prices – energy and raw materials – decelerated between January and May. »
Patrick Artus, at Natixis, sees there “a price-wage loop”while Denis Ferrand prefers to talk about “Price-income loop, because the diffusion is now via the rise in wages, of course, but also via that of corporate profits. In fact, each economic actor seeks to limit his financial loss due to the waltz of labels”.
For Olivier Passet, “it will be difficult to eliminate this hard core of inflation because this diffusion is now inscribed in the memory of the economic system and the wage negotiations of 2023 will be based on this still upward trend”. In addition, abounds Patrick Artus, “productivity decreases, which pushes up the cost of wages even more, and therefore prices”.
A challenge for central banks
This inflationary trend is all the more “embedded” in the economy as it feeds on several ground swells. There are supply difficulties for companies. And even if these difficulties seem to be easing, they are not going away. In addition, States stimulate inflation by investing in environmental transition. The European Green Deal and the IRA, its American equivalent, have put hundreds of billions of euros of public money on the table, envelopes which will lead to increased demand when supply is already failing to follow.
We must also take into account the global shortage of labour, which increases wage expectations, and therefore business costs and inflation at the end of the chain. Not to mention the relocation of industries considered strategic, which also induce additional costs.
In this context, “Central banks will have a hard time bringing inflation down to around 2%, their medium and long-term objective”, underlines Olivier Passet, who pleads so that the central bankers agree to put up with an inflation target of around 4%. For the moment, the head of the American Federal Reserve, Jerome Powell, mentioned on June 23 the possibility of raising rates twice by the end of 2023, just to overcome the rise in prices. As for the European Central Bank (ECB), it should continue to raise rates in July.
Christopher Dembik, at Saxo Bank, urges caution, however. “Wanting to do too well (and return to the 2% target, editor’s note), the ECB risks seizing up growth that is running out of steam. » To his eyes, “it is very difficult to have a firm opinion on the evolution of inflation”. If only because China is going through a period of near deflation, “that it exports to the rest of the world”he specifies, before adding: “You have to be humble. We are bad at predicting inflation. »
————–
Food, wages: 2023 inflation in figures
At the end of the year, according to INSEE, inflation in France compared to the end of 2022 should be +4.4%.
For food, INSEE forecasts +7.4% over one year. For services, the rise in prices would be +4.2% (against +3% currently). Energy and manufactured product prices should rise by +3% year on year.
According to a study by thea Banque de France published in January, wage negotiations in the branches have concluded with a wage increase of 5% on average in 2022 (compared to 1% in recent years).
#French #economy #affected #wave