RISKS OF SOCIAL CRISIS

FACING THE DECLINE IN PURCHASING POWER

Price growth in France continues to be driven by soaring hydrocarbon prices exacerbated by Russia's invasion of Ukraine. Over twelve months, energy prices rose another 26.6%. But the increase is also fueled by an “acceleration in the prices of services, food and manufactured products”, specifies INSEE.

An impact evaluated between 168 euros and 421 euros

France is therefore rediscovering a waltz of labels unprecedented since the beginning of the 1980s and which is likely to last. After the entry into force of trade agreements between producers and large retailers - which are also being renegotiated - food prices soared by 3.8%, against 2.9% in March. Fresh produce soared by 6.6%.

The rise in food prices alone "could reduce household purchasing power by 0.4% to 1.1% this year, i.e. between 168 euros and 421 euros with" an impact three times greater for the 10 % the most modest compared to the 10% most affluent”, calculated the economists of Asterès. But the prices of services also increased, by 2.9%.

“The price shocks are spreading throughout the economy, which does not bode well ,” summarizes Philippe Waechter, director of economic research at Ostrum Asset Management.

Decline in growth

Inflation risks leading to losses of purchasing power even if the executive has multiplied the devices in the form of a “resilience plan” to help French people get through this difficult period. Energy check, then tariff shield on gas and electricity prices.. .

As a result, household consumption is down, and GDP growth is zero in the first quarter of 2022 in France, again according to INSEE. In March, consumption fell by 1.3%, halting French growth in the first quarter, INSEE announced on Friday.

After peaking at 7% in 2021, economic growth is likely to stall in the coming months. Most forecasting institutes have recently downgraded their GDP growth figures for 2022.

“For the next government, the equation will be very complicated. He will have to manage the effects of this inflation on the purchasing power of households”, underlines the economist of Ostrum Asset Management Philippe Waechter. “As no government wants to enter into indexation procedures, there are necessarily losses of purchasing power and therefore inequalities which will increase”, he recalls.

On this point, the rise in fuel prices in recent weeks has accentuated territorial disparities in France. All households living in rural areas and dependent on the car find themselves penalized by the rise in fuel prices. Even if the government has implemented several measures such as the 18-cent discount on fuel prices or the inflation check, these non-targeted devices benefit a large number of households without distinction.

Several recent works by economists have shown that these measures could widen the gap between population categories, while those at the bottom of the scale are the most exposed.

An increased risk of social tensions

The next government will also have the heavy task of curbing strong social tensions if inflation continues in the coming months. Already during the presidential campaign, numerous snail operations and blockades of fuel depots took place throughout the territory. The discontent could grow as economic activity slows down. Macronia.

“Inflation generated political crises throughout the 20th century. Inflation has led to social crises in many countries,” recalls Anne-Sophie Alsif.