Purchasing power: should we expect an inflation tsunami in 2023?

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Catch-up effect for some, real “inflationary shock” for others… Many actors or simple observers of the French economy are rather pessimistic about the rise in prices in 2023.

The price spike in 2022 is historic. And for many, it’s far from over: inflation should continue to climb over the first six months of 2023. It “should peak between April and June” even estimated Michel-Edouard Leclerc in an interview at JDD. A worrying situation that directly affects the purchasing power of the French. The boss of E.Leclerc also said that the rise in food prices had reached 12% on average on the shelves of French hypermarkets in 2022. According to figures from the National Institute of Statistics and Economic Studies (Insee), consumer price inflation rose to an annual average of 5.2% over 2022 as a whole, compared to 1.6% in 2021.

“We are entering a cycle of lasting inflation”

On the government side, we are trying to be more optimistic. The Minister of the Economy, Bruno Le Maire, was still counting on a drop in inflation “during 2023” during an interview on France Inter on January 4. With an inflation target of 4.3% on average over the whole year. The Governor of the Banque de France, François Villeroy de Galhau, declared in November 2022 that he wanted to bring the inflation rate back to around 2% within two or three years. This “commitment” made a few months ago in several media now seems increasingly difficult to keep. Especially since the distributors claim that the situation is not likely to improve. “We know three to four months in advance how prices will evolve through our central purchasing offices,” said Michel-Édouard Leclerc, who had already spoken of a tsunami concerning the wave of inflation expected in 2023.

Dominique Schelcher, boss of Systeme U, had not used such a catastrophic image but shared the observation: “This year we passed on the rise in raw material costs and the impacts linked to shortages. We have before us, in 2023, that of gas and electricity prices. Behind, there will be a third wave with the cost of the ecological transition. We are entering a cycle of lasting inflation. It will eventually fall, but no one can say when. Without no doubt in 2023.”

“Catch-up effect” in 2023

Several economists had already shown themselves to be pessimistic in July 2022 duringa round table which took place in the run-up to the examination of the Purchasing Power Bill. They had notably alerted to an “inflationary shock” in 2023. Mathieu Plane, deputy director of the analysis and forecasting department of the French Observatory of Economic Conditions (OFCE) had notably declared that inflation in 2022 had been contained by government aid. . An analysis confirmed by Agnès Bénassi-Quéré, Chief Economist of the Directorate General of the Treasury by: “There is no miracle, purchasing power is better in France, but it is thanks to public support”.

If the country has been a good student in Europe, it could experience “a catch-up effect” in 2023. “We had less inflation than our partners, because we did not have shields. But we do not cannot maintain these devices forever”, noted Mathieu Plane. “We are going to get out of the tariff shield and discounts of 15 cents (on the price of fuel) which will create an inflationary shock for people who until then were protected. In 2023, we can have more inflation than our partners by a catch-up effect.

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