The French economic landscape has just passed a symbolic milestone: inflation has finally fallen below the 2% mark, a first in three years. While economists and markets scrutinize every variation in indicators, this return to a historically low rate marks a turning point after a period marked by incessant price increases, particularly those of energy. In this post, we will analyze in detail the figures that confirm this trend, based on the latest data provided by INSEE. We will then examine the specific factors that contributed to this slowdown in inflation, and the implications of this development for consumers, businesses and economic policies.
Inflation dynamics below 2%
Just a few months ago, it was thought impossible! But for the first time in three years, France has recorded inflation below the 2% threshold, marking an unexpected return to relative price stability. According to the latest data published by INSEEconsumer prices rose by 1.8% in August 2024 compared to the previous year, compared to 2.3% in July. This moderation is attributed to a sharp slowdown in energy prices, the increase of which was largely contained compared to the previous year. After months of tension on energy and food prices, this turnaround marks a notable easing, particularly on petroleum products, the costs of which fell by 8% over one year. The Harmonized Index of Consumer Prices (HICP), which is the reference at European level, also reflects this trend, falling from 2.7% in July to 2.2% in August, confirming that this movement of price moderation is not isolated to France.
However, this improvement does not mask some persistent areas of tension. In August, inflation over one month rose by 0.5%, compared to 0.2% in July, and reveals a dynamic that is still volatile. Tobacco prices continued to soar with an increase of 8.7%, while service costs increased by 3% over one year, driven by a sharp increase in the prices of transport services. This situation shows that while general inflation is slowing, pockets of inflationary pressure remain, complicating the analysis of an economic situation that is far from being completely stabilised.
Energy, services, food: What the drop doesn't tell you about real price increases!
Inflation below 2% offers a welcome respite, but a closer look reveals that not all components of the economy are following this soothing trend. Energy prices, which had soared last year, rose only slightly by 0.4% in August, showing a marked slowdown compared to the spectacular increases of 2023. However, electricity and gas continue to rise, by 10.5% and 9.4% respectively over one year, although their pace is now much more moderate. Food prices are holding steady at +0.5%, which illustrates stability in this sector where tensions had been particularly acute. This heterogeneity in price developments reflects an economy in full transition, where the dissipation of energy shocks coexists with persistent tensions in other sectors.
The impact of this relative disinflation could, however, be short-lived if other pressures continue. The cost of services, a key segment for the French economy, has seen its rate of increase accelerate, particularly in transport where prices have rebounded sharply. This upturn raises questions about the sustainability of this fall in inflation in the medium term, especially since the European Central Bank, in response to the calming of prices, has decided to lower its interest rates once again. While this offers a breath of fresh air to households and businesses, this policy remains dependent on the evolution of energy prices and economic resilience in Europe. The challenge for the authorities will be to maintain this course without causing new waves of inflation in a still uncertain economic context.
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