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Inflation rises, consumption falls, growth revised upwards – Economics


The rise in consumer prices therefore accelerated sharply in August to 1.9% over one year, against 1.2% in July, according to the provisional estimate published on Tuesday by INSEE. “This rise in inflation would result in particular from the rebound in the prices of manufactured products in connection with the end of the summer sales. Food prices and energy prices would accelerate, ”notes the Institute of Statistics, whose use is to use the conditional since the estimates are provisional until the publication of final figures on September 15.

INSEE also stresses that “the prices of services would increase slightly in line with those of transport. The increase in tobacco prices should continue, over one year, at the same rate as the previous month ”. Over one month, consumer prices rose 0.6% in August, after + 0.1% in July.

The price of manufactured goods on the rise

Also according to this estimate, the prices of manufactured products have “clearly” rebounded, those of food have accelerated “in the wake of those of fresh products” and those of tobacco are stable after a drop the previous month, underlines INSEE . On the other hand, the prices of services and those of energy are slowing down.
Finally, the harmonized consumer price index, which serves as a basis for comparison at European level, should increase by 2.4% after + 1.5% in July. Over one month, it should grow by 0.7% after + 0.1% the previous month.

Consumption down after increases in May and June

Household consumption in France has “markedly” decreased in July, by 2.2% compared to June, after increases in May and June due to deconfinement, reported INSEE. “This drop comes from the decline in manufactured goods (-2.7%) as well as the sharp decline in food consumption (-2.9%)”, explains the National Institute of Statistics and Economic Studies.
After tumbling 8.7% in April with the implementation of the third confinement, household consumption skyrocketed during the deconfinement in May, by more than 10%, and had further increased slightly (+ 0.3% ) in June. In detail, the drop in consumption of manufactured goods is linked in particular to a drop of 7.9% in consumption of clothing and textiles, which had experienced significant enthusiasm in June. It thus finds “a level close to that of before the crisis”, indicates INSEE.
Purchases of durable goods also fell by 1.9%, in particular for transport equipment, due to a drop in purchases of new cars. Spending on housing capital goods fell by 1%, after falling 1.6% in June.
On the other hand, energy consumption rebounded by 1%, after a drop of 1.4% in June, with fuel consumption “approaching its pre-crisis level” according to INSEE. household consumption is closely monitored, consumption traditionally being the main engine of French growth. This is all the more true since the onset of the health crisis, with households having saved a lot due to health restrictions last year. Unlocking these savings will be a key element in the French economic recovery.

Growth in the second quarter revised up

As for the gross domestic product (GDP), it increased by 1.1% in the second quarter. INSEE has therefore revised upwards its initial estimate for the second quarter, which was 0.9%, after a stable first quarter. The growth overhang for the year 2021, namely the level it would reach for the whole year if it were zero in the third and fourth quarters, is 4.8%, said INSEE. INSEE and the government are forecasting growth of 6% for 2021. In 2020, French GDP had experienced a historic decline of 8% due to the pandemic.
GDP in the second quarter remains 3.2% lower in volume than in the fourth quarter of 2019, before the pandemic. The gap was still 4.3% in the previous two quarters. Household consumption expenditure, the main component of GDP, rose 1% in the second quarter marked by the third confinement, but also by its exit from mid-May. But they still remain well below their pre-crisis level, at -5.9%.
Final domestic demand increases by 1.2% and gross fixed capital formation, which reflects investment, increases by 2.4% and exceeds the pre-crisis level for the first time. Foreign trade contributed negatively to the evolution of the GDP in the second quarter, imports growing more strongly (+ 1.7%) than exports (+ 1%).
INSEE finally underlines a strong rebound in gross disposable income of households, of 0.8%, over the quarter, in particular thanks to an acceleration in the wage bill of 1.1%, which is now down to -0 , 6% of its pre-crisis level.