How to explain this small monthly rise in inflation in August?

Small surprise on the inflation front, whose downward trend stopped in August. According to the first INSEE estimate, prices actually increased by 4.8% in one year, compared to +4.5% in the previous month.

This monthly acceleration in price increases is the first since April, how do you explain it?

This rally is misleading, as confirmed by Sylvain Bersinger, chief economist at Asterès. “It is exclusively due to the increase in energy prices, whose evolutions are by nature erratic,” he explains in a note.

Energy prices increased by 6.8% year-on-year, in particular due to the increase in the price of petroleum products and in the regulated prices of electricity on August 1, 2023.

“A more usual inflation rate probably during 2024”

“Inflation has come down in all other major items of household spending,” he continues. And indeed, food prices should slow for the fifth consecutive month to +11.1% (versus +12.7% in the previous month), as well as, to a lesser extent, those of manufactured goods (- 0.3 points) and services. (-0.2 points).

“The deflationary trend is, therefore, very present and occurs in all sectors of the economy, except energy,” sums up Sylvain Bersinger.

Globally bearish trajectory

For the latter, this rebound is “temporary” and the downward trend should resume “in the autumn at a rate that is difficult to predict, precisely because of important events that have been observed for several months, such as the general fall in the prices of gas (despite a slight rebound in the summer) or the drop in inflation on production prices (ex-factory price)”. 

Still, the pace will be “a slow phenomenon.” “With the general fall in inflation, wage growth will slow down (in late 2023 or early 2024), causing a lasting drop in service inflation and thus a return to a rate of more usual inflation, probably during 2024,” says the specialist. 

According to the projections of the Bank of France (in June), “total inflation measured by the HICP (harmonized index of consumer prices) would gradually decrease to around 2% by 2025, provided that there are no new disturbances in imported raw materials.