Record inflation, falling purchasing power… These grim forecasts for households

The war in Ukraine reshuffles the cards for the French economy. In a study published on Wednesday, INSEE takes stock of the current and future consequences of the conflict for households. Record inflation, falling purchasing power and consumption… Here are the latest forecasts.

What will be the magnitude of the economic consequences of the war in Ukraine for French households? In a survey published on Wednesday, the National Institute of Statistics and Economic Studies (Insee) shared its first observations. One thing is certain, the effects of this conflict will be significant in the short and long term. Starting with the price increase. On Tuesday, INSEE revealed that it had reached 3.6% in February over one year, a record since 2008. Moreover, it could have reached 5.1% without the tariff shield on the regulated tariffs for the sale of gas and electricity.

4.5% inflation in the second quarter

But this price increase is not over. She should reach 4% in March before continuing to climb. Two causes: the surge in energy prices due to geopolitical uncertainties first, with in particular a barrel of oil above 100 dollars which drives up prices at the pump. But also the label waltz expected in April on food products due, on the one hand, to the implementation of trade negotiations between producers and large retailers and, on the other hand, to the rise in the price of raw materials. Interviewed recently by MoneyVox, Emily Mayer, of the specialist firm IRI, thus expects an average increase of 5% consumer products with double-digit peaks on pasta, for example.

War in Ukraine: pasta, oil, milk, meat… This price surge awaits you in April

As a result, inflation should rise in France 4.5% in the second trimester. A figure that includes the discount of 15 cents on fuel pump prices from April 1, which will help to temper the effect of high crude oil prices.

Lower consumption

Consequently, the war in Ukraine could moreover affect household consumption in the course of the second quarter, or even as early as March, due to the rise in prices and a possible wait-and-see attitude linked to the less favorable outlook in terms of quality of life, adds INSEE. Indeed, the people questioned by INSEE anticipate a sharp drop in the general standard of living in France. This movement is all the more notable in that, in general, the periods immediately preceding the presidential elections are accompanied by a definite resurgence of optimism from time to time.

According to INSEE, with the rise in inflation, the purchasing power of households should decrease by 1.4% in the first quarter with, in the end, a drop in household consumption of 0.5%.

In this context, French growth over the first three months of the year should be 0.3% after 0.7% in the previous quarter. While the magnitude of the immediate economic consequences of the war in Ukraine is not comparable to that of March 2020, with the onset of the health crisis, this conflict has reshuffled the cards, exacerbating the tensions already present on prices and lowering the outlook. of activity declared in surveys by business leaders, underlines INSEE.