Should this be seen as an alarm signal on the restart? At the end of October, even as the threat of Covid-19 seems to have receded and unemployment continues to decline, the morale of the French is at half mast. The confidence index on the economic situation, calculated every month by INSEE fell by two points (on a basis of 100) to fall below its long-term average. This decline is mainly explained by the concern over the rise in consumer prices, which increased by 2.6% over the last twelve months, according to figures released Friday, October 29 by INSEE, the highest increase since October 2008, underlines Aurélien Daubaire, head of the consumer prices department at INSEE. Energy prices alone have increased by 20.1% in one year.
” The October monthly survey on household confidence testifies to a very rising perception of inflation, which suddenly exceeds 2018 levels significantly. Conversely, fears about unemployment are low ”, confirms Jean-Luc Tavernier, Director General of INSEE. And again, economists stress, the level of inflation in France remains relatively contained, especially compared to Germany, where it reached 4.5% in October, or 5.5% in Spain, against 3.4% on average in September in the euro zone. In the United States, the rise in prices is just as significant (5.3% in October).
This surge in consumer prices, fueled everywhere in the world by energy prices – they alone represent half of the increase in France – is weighing down the recovery, weakening consumption. This is one of the paradoxes of this unprecedented crisis. Despite the historic recession of 2020, purchasing power has in fact been preserved by budgetary support measures, but also because gasoline or fuel oil plunged during the pandemic. “The fall in the price of these products has contributed to the increase in purchasing power by 0.41 point of real income”, recalls the Rexecode Institute in a note published Tuesday, October 26. “Between 2019 and 2022, by cumulating the decreases in 2020 and the increases in 2021, the evolution of energy prices will have cut household income by one point”, specifies Denis Ferrand, CEO of Rexecode.
What about companies?
In this cumulative impact, electricity and gas weigh four fifths and oil for the rest. Insofar as consumption represents 55% of GDP, this knife blow in household purses could have an impact on economic activity.
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