The conflict in Ukraine raises inflation to 4.5% in France

Even stronger than expected. In March, inflation accelerated considerably. Consumer price inflation reached 4.5% in twelve consecutive months, after 3.6% in January , according to provisional data published this Thursday by INSEE. That is more than the 4.2% anticipated by the statistics institute on March 16. We have to go back to the 1980s to find such a high level of inflation.

In one year, the harmonized consumer price index rose 5.1% after 4.2% in February. Much less therefore than in Spain where it shoots up to almost 10% or in Germany, where it reaches 7.3%.

energy and food

This increase in prices, of course, can be explained by the invasion of Ukraine on February 24 by Russia , the main exporter of oil and gas, and its impact on the energy market. In one year, the increase in the energy category was almost 29%, a higher than expected increase. It explains more than half of the increase in the index.

Food prices are also accelerating faster than expected, rising 2.8% in March, up from 2.1% in February, with prices for fresh produce soaring. In the rest of the games, the increases are more moderate.

“The inflation of other goods and services -which represents around three quarters of the index- remains stable, around 2%, which seems to mean that the rise in energy prices is not affecting the rest of the population. economy”, observes in a note Sylvain Bersinger, economist at Asterès. It should be noted, however, that in one month the prices of manufactured goods increased by 1.5%.

Widespread inflationary pressures

This rise in inflation will have a first consequence: a new automatic revaluation of the minimum wage at 1is May: between +2.4 and +2.6%, the Ministry of Labor announced on Thursday.

And inflation should remain high for many months to come. According to the latest INSEE projections, it would remain around 4.5% between April and June. For her part, Charlotte de Montpellier at ING sees it exceed 5% in the coming months. “Inflationary pressures will increasingly spread to all sectors of the economy,” she warns.

In fact, commodity prices have reached new highs since the start of the conflict. Western sanctions against Russia, also a major player in the markets for nickel, palladium, titanium, steel and wheat, are driving up prices, which portends a explosion of production costs It’s already up 20% year-on-year. This puts leading companies at risk who can raise their prices.

Purchasing power losses

the homes are also affected. Hit by the increase in your limited expenses. “It will be necessary to see if they continue the wages and the social minimums. If not, there will be losses in purchasing power.” warns in an interview with “Echos” Xavier Jaravel, professor at the London School of Economics . At half-staff in January (-2%), consumption recovered, however, slightly in February (+0.8% in volume) according to INSEE. “Savers are the first victims of rising prices,” says Philippe Crevel of the Cercle de l’Epargne.

The theme is at the center of Presidential campaign . To cushion the economic blow of the invasion of Ukraine, the executive has already put some thirty billion euros on the table while betting that the rise in inflation will not be sustainable.

In mid-March, the Banque de France estimated in its center stage which could return, as an annual average, below 2% in 2023. On the other hand, it would remain at a high level of 3.3% in a “degraded” scenario. Everything will depend on the duration of the conflict in Ukraine. But also the intensity of wage demands that will arise from the rise in consumer prices.

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