Inflation in France remains firm. While the country could congratulate itself on having the lowest level of price increases in Europe during 2022, this is no longer the case. Quite the opposite.
With a rate of 6.2% in September 2022 (HICP), French inflation was the lowest in the euro area. Far behind are Spain (9%), Italy (9.4%), Germany (10.9%), Belgium (12.1%) and especially the Netherlands (17.1%). A year later, photography is very different. France is now among the five countries with the highest harmonized consumer price index. With 5.6% in September 2023, it is above Germany (4.3%), Spain (3.2%), Belgium (0.7%) and especially the Netherlands, which were even in deflation compared to the previous month (-0.3%). In the latter country, inflation fell 17.4 points in one year, compared to only 0.6 points in France during the same period.
Is there a French curse when it comes to getting out of crises? During the 1973 oil crisis, it would take the country a year and a half to return to growth, during the 1993 slowdown recovery would take two years, and what about the long convalescence after the subprime mortgage crisis that would last? 20 quarters and even more? ?regarding the fall in the unemployment rate. With each of these shocks, for most of our neighbors, the rebound was much faster.
This is explained because France is a fairly managed country so it has a certain number of devices that act as shock absorbers when things go wrong and when things go better they slow down the arrival of the sun. “France always has a lagging effect in one direction or another.”
Since the beginning of 2023, France has fallen behind its neighbors. A period that corresponds to the end of the “cushion” installed the previous year.
“We put in place price barriers for gas and electricity and a discount at the pump, which reduced French inflation last year,” explains economist Gilbert Cet, professor at the Neoma Business School in Les Echoes. These devices made it possible to reduce the inflation peak. postponing its effects until it is abandoned. What’s more, they only affect the measurement of inflation for twelve months.”
In other words, the inflation rate in France was initially kept artificially low by social protection measures. Gas and electricity price shields, fuel rebates and controls… In total, the measures to support purchasing power will have cost about 100 billion euros between 2021 and 2023.
With the reduction or elimination of most of these measures and the increase in fuel prices in recent weeks, inflation in France is falling but the slope is very slight.
A management of the economy by the State that is also reflected in the evolution of the prices of food products. In France, commercial negotiations between manufacturers and distributors are fixed by law and can only take place between December and March. This is not the case with our neighbors where suppliers and merchants can negotiate their prices throughout the year.
Our system, which is supposed to protect farmers’ incomes, actually prevents prices from moving more smoothly. Thus, year-on-year food inflation fell in France according to INSEE from 15.9% in March to 11.2% in August (-4.7 points), while among our Dutch neighbors this same index registered a decrease of almost 9 points according to the Central Office. of Statistics. The same happens in Germany, where the decline is even more spectacular. According to the Destatis institute, food inflation across the Rhine was 22.3%. It fell to 7.5% in September and is now 2 points below France (9.6% in September).
By wanting to frustrate the laws of the market to protect its population, does the country’s economic policy run the risk of delaying the end of inflation for a long time? Because beyond the “control” of prices, there is the issue of the minimum wage, which is one of the only ones in Europe that is indexed to inflation. But wages rising as rapidly as prices in turn drive further price increases.
The risk is that French competitiveness will be affected by this gap in wages and prices compared to our neighbors and, in particular, Germany. However, France can no longer devalue its currency as it did before the euro to artificially increase its competitiveness…
Source: BFM TV
