After stagnation, clearing up? INSEE foresees growth for the first half of 2024 “ moderate », of the order of 0.2% per quarter, while inflation continues to slow down. By mid-year, the rolling price increase over twelve months would only be 2.6%, instead of 3.1% in January 2024 and 3.7% in December 2023. These forecasts, published Wednesday February 7, describe a “timid restart of activity »after two last quarters of 2023 that were completely sluggish and a year which ended with a modest 0.9% growth.
At half mast since the start of the inflationary crisis, “consumption should be the main driver of the French economy”, estimates Nicolas Carnot, director of economic summaries at INSEE. Supporting this conviction is the lull that is being felt in prices, particularly food prices, and the gains in purchasing power that could result from future salary increases and the revaluation of social benefits. “Food inflation has been stable for several months”, argues Mr. Carnot. This would stand at 1.5% over one year in June 2024, compared to 5.7% in January 2024.
Long the main driver of inflation, food, which peaked in May 2022, is now being supplanted in this role by services. A sector where prices essentially depend on labor costs, while those of manufactured products are also based on raw materials and inputs. In the middle of the year, the increase in prices of services over twelve months would thus reach 3% – twice as much as food -, while several specialized institutes such as WTW or LHH estimate that wages could increase by 4% on average this year, to at least partially catch up with inflation. The prices of manufactured goods, on the other hand, will almost no longer contribute to inflation, according to INSEE.
What about French savings?
The whole question is whether households will take advantage of this newfound consumption appetite to dip a little into their savings (Livret A, LDD and other life insurance contracts). The savings rate in France remains significantly higher than before the health crisis, while in the United States, where growth reached 2.5% in 2023, most of the nest egg accumulated during Covid was spent. Everything will depend on the context: “The renewed confidence could encourage households to draw on their savings, while, conversely, an excessive wait-and-see attitude could lead to a new semester of stagnation”notes INSEE.
You have 50% of this article left to read. The rest is reserved for subscribers.