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 the 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 spike in food prices in May
For the moment, in the food departments, the waltz of labels continues. A new jump in prices is even expected in May by INSEE economists: food inflation would thus reach 15.8% over one year – i.e. 0.9 points more than in April – before landing to 15.5% at mid-year.
If agricultural prices have been falling for several months, “the producer prices of the agri-food industries do not show any inflection at this stage”, notes the institute. Hence the pressure put by Bercy on manufacturers and large retailers so that they reopen negotiations and pass on the fall in the prices of certain raw materials as quickly as possible. Furthermore, the prices of services are also accelerating (+3.5% expected in June), driven by wage increases.
In the current landscape, one of the positive points comes from fewer industrial companies considering an increase in their selling prices in the coming months.
The impact of the rate hike
For now, 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. Faced with soaring prices, nearly three-quarters of households have changed their consumption habits, says the institute. Held back by the rise in the cost of money, investment in real estate by households and, above all, that of companies would also cease to support growth. Activity should dip in manufacturing industry and continue to decline in construction. It would 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 thus stand at 0.5%, according to INSEE.
