France: inflation pauses

This is good news that will delight both the French and the executive. According to provisional data published this Wednesday morning by INSEE , inflation slowed down in August. Calculated on an annual basis, it now reaches 5.8%, much less than the 6.1% recorded a month earlier and which marked a historic high.

While many households are worried about what they will have to pay in the coming months for their gas or electricity bill, the fall in inflation in August “is due to the slowdown in energy prices” , explains INSEE.

Continued rise in the prices of manufactured goods and food

However, if the news is certainly good for the wallets of the French, it does not mean the end of the pressure on the purchasing power of households. Because if the energy bill weighs less than in previous months, it remains heavy. On an annual basis, energy prices are still up 22.7% (nearly double the increase seen a year earlier).

And at the same time, the prices of services continue to progress at the “same pace as the previous month” (3.9%) while “those of manufactured products and food (in particular excluding fresh products) should accelerate”, adds INSEE.

In fact, the prices of manufactured products rose by 3.5% in August (against 2.7% a month earlier). While those of food accelerated to reach an increase of 7.7% on an annual basis (compared to 6.8% in July), despite a slowdown on the fresh produce front (up by only 3.5 %). Suffice to say that the financial situation of households remains tense when it comes to doing their daily shopping.

Consumption, a running out of steam

It therefore remains to be seen whether this moderation of inflation will be sufficient not to disrupt the growth momentum of the French economy, while the Banque de France anticipates a stabilization of activity . Because this Wednesday, INSEE also confirmed that GDP had increased by 0.5% in the spring. And this rebound is largely attributable to an upturn in consumption Household. It rose by 0.3%, after posting a decline of 1.2% in the first quarter.

While INSEE already noted a further decline in household purchasing power in the spring, data on consumption of manufactured goods alone, published on Wednesday, show that household purchases are showing signs of weakness. According to INSEE, household consumption in France fell by 0.8% in July, after two months of slight rebound. And shows a fall of 4.3% over one year.

A decline “mainly linked to the new fall in consumption of manufactured goods” (-1.4% after -0.7%), pulled down by purchases of “durable” goods (-1.6%, after an increase of 0.8% in June), with in particular a drop in purchases of cars and household goods. But other household spending is also down. In particular those of clothing-textiles (- 3.7%) and those related to food (- 0.4%).