In France, inflation finally below 2% in August and uncertainties over growth

At 1,9% over one year in August, compared to 2,3% in July, inflation has calmed down due to the "very clear slowdown in energy prices", details the National Institute of Statistics and Economic Studies (INSEE) in a provisional estimate published on Friday.

The cost of energy thus increased by only 0,5% over one year in August 2024, whereas it had jumped by almost 7% a year earlier, "mainly" due to the increase in regulated electricity prices on August 1, 2023, national statisticians point out.

Food prices also rose 0,5% year-on-year in August, the same pace as in July.

"Prices are falling and will continue to fall, inflation is behind us," said the vice-president of Lidl France, Michel Biero, on RTL.

But after months of double-digit inflation on food products, "we will not be able to return to the prices of two years ago," he immediately qualified.

For the boss of Coopérative U Dominique Schelcher, who spoke on RMC/BFM TV, "prices have been falling since May in France, very slightly unfortunately for the French and this is not yet reflected significantly enough" in their shopping carts.

Another point of attention, inflation in services accelerated in August, jumping by 3,1% over a year after having 2,6% in July. However, services alone weigh more than half of the consumer price index.

Chief economist at the Asterès firm, Sylvain Bersinger sees two possible explanations for this surge: either an increase in the cost of hotels and transport linked to the Olympic Games, or a repercussion of salary increases in the sales prices of the sector.

But the trend towards a slowdown in overall inflation "seems to be well underway," he emphasizes in a note.

CPI and HICP

BNP Paribas economist Stéphane Colliac also believes that "with the decline of the Olympic effect and the gradual reduction of inflationary tensions in the sector, inflation in services should decline to 2,7% over one year at the end of the year and 2% at the end of the first half of 2025".

By falling to 1,9%, the consumer price index (CPI) has in any case fallen below the 2% inflation target pursued by the European Central Bank (ECB) - as in Germany, according to the August figures published on Thursday.

While the CPI is the reference in France, the ECB nevertheless favours another indicator, the harmonised consumer price index (HICP), which increased by 2,2% over one year in August, according to INSEE.

The CPI could also be revised upwards during the second INSEE estimate scheduled for September 13, as it was in May and June (+0,1 points each time compared to the first estimate).

The slowdown in inflation in France and Germany should encourage the ECB to proceed with a further reduction in its key rates in mid-September, which could support household consumption.

Purchases of goods by French households have already rebounded by 0,3% over one month in July, after falling by 0,6% in June, the month in which the dissolution of the National Assembly was announced, according to INSEE.

French statisticians finally reported on Friday a growth of 0,2% in the gross domestic product (GDP) in the second quarter, i.e. 0,1 points less than announced in the first estimate published at the end of July (0,3%).

While the economic consequences of the political uncertainty caused by the dissolution remain uncertain, business investment is down 0,5% compared to the previous quarter, a decline of the same magnitude as that recorded between January and March.

Households' spending fell by 1,1% after having plunged by almost 2% in the first quarter.