The INSEE cautioned on Tuesday that the price growth in the coming months will be larger than predicted in December. It is expected to continue between 3% and 3.5 percent for the next year, till the end of June.
Growth dropped somewhat more than projected at the start of the year, but rebounded more strongly than expected in the spring, and inflation was much higher than expected. On Tuesday, INSEE amended its December estimates in light of the shifting backdrop of the start of the year.
The statistics institute has, in fact, reviewed the influence of the Omicron variant's spread on activity. The impacts of the Omicron wave, he says, will be "temporarily restricted." They will be more noticeable this winter than projected, but will decrease in the second quarter. As a result, INSEE now forecasts a 0.3 percent growth in GDP in the first quarter and a 0.6 percent increase over the next three months, compared to 0.4 percent and 0.5 percent increases forecasted at the end of last year.
Higher growth achievement
This revised scenario would result in a 3.2 percent growth overhang at the end of June 2022, which is greater than the prior forecast (3 percent ). French GDP would thus be 1.8 percent more than it was before the crisis, a discrepancy that has now been revised upwards by 0.4 point. According to INSEE, the end of 2021 was "a touch better than projected," with varying scenarios depending on the industry.
Unsurprisingly, the revival of the epidemic is wreaking havoc on retail, catering, and, in particular, lodging. According to the institute, household spending is likewise taking its time at the start of the year, but it expects a catch-up impact between April and June.
Increase in food products
Despite an uptick in inflation, French growth should remain steady. INSEE also upped its projections for price movement on Tuesday. According to the institute's updated predictions, the growth in consumer prices will continue between 3 and 3.5 percent by the end of June, with a little increase over 2.5 percent by the end of 2021. Already in February, the increase should be greater than 3%. (it was 2.9 percent in January).
In response to the spike in oil prices induced by international tensions, INSEE has changed its working hypothesis. Its updated predictions are based on a Brent price fixed at 90 dollars per barrel, rather than 75 dollars.
His argument, on the other hand, stays the same: the rise in prices over the following several months would still be the outcome of two conflicting processes. On the one hand, energy inflation should fall, with Brent prices freezing; on the other hand, food and manufactured goods prices should climb, with the enormous surge in production costs being passed on to consumers. According to INSEE, food prices will rise 2.5 percent over the next twelve months in June.
1 point less inflation thanks to the "tariff shield"
Inflation's impact on consumers would thus extend much beyond the energy cost alone. While the subject of buying power is already at the core of the presidential campaign, the statistics institute has examined the impact of the executive's "tariff shield" put in place to restrict the rise in gas and electricity costs. Without these steps, the inflation projection for February would have been at least one point higher, about 4.3 percent, according to his calculations. "By the end of 2022, I hope the noose will ease, but for the time being, we have significant inflation," said Economy Minister Bruno Le Maire on France Inter on Tuesday.
The Governor of the Banque de France, François Villeroy de Galhau, sought to reassure the Finance Committee of the National Assembly at the end of the day: "I guarantee that we, the European Central Bank and the Banque de France, will do this necessary for inflation to return to around 2% over time, in the eurozone and a fortiori in France," he said. According to him, this would allow France to "consolidate" the improvements in buying power per inhabitant, which are anticipated to be over 8% cumulatively between 2015 and 2021.