2023-05-05 07:09:18
Announced for the second half of 2023, the slowdown in inflation might take a little longer than expected. In a note on the economy, published Friday, May 5, the National Institute of Statistics and Economic Studies (Insee) displays its caution: if inflation over twelve months, which stood at 5.9% in April, following 5.7% in March, « [pourrait] ebb in May and June” and reach 5.4% in the middle of the year, « this does not presume the continuation”warns Julien Pouget, head of the business cycle department at INSEE.
Explanation: following the rise in energy and food prices, services are likely to take over by driving prices up, in a less spectacular way, of course, but just as penalizing for consumers. Indeed, recalls Mr. Pouget, « [ils] represent 50% of household consumption”which is much more than food, which accounts for only 16% of total French spending.
At this stage, the rise in service costs over one year remains contained, at only 3.5%, compared to 15.8% for food, but “second-round effects”, in other words contagion, might occur feel in the months to come.
On food prices, INSEE is also cautious: despite the fall in agricultural prices on world markets and the prospects for renegotiations between producers and distributors, economists do not foresee “no decline in the very short term”. “Agricultural producer prices still remain above their pre-crisis level »remarks Mr. Pouget.
Business concerns regarding the level of demand
Under these conditions, we should not hope to see a recovery in household consumption in the second half of 2023. When they go shopping, the French have already shaken up their habits: in March, nearly three quarters of them (72%) claimed to have changed their way of consuming compared to 68% in December 2022. The 9% drop recorded over the past year by INSEE also reflects more “a change in product range” than a drop in the volume of purchases.
The other driver of activity, investment, will not run at full speed in the coming months either. The rise in interest rates intended to slow inflation is already having a heavy impact on the real estate market – and therefore household investment – as well as on new construction. Businesses, won over by some concern regarding the level of demand, are likely to moderate their investment projects. Ultimately, growth in the second quarter should be limited to 0.2%, identical to that recorded in the first quarter.
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