Inflation revives the debate on purchasing power



Should we be worried about inflation? The price index jumped to 3% in August in the euro zone, on an annual basis, above the European Central Bank’s (ECB) target of 2%. In Germany, the price increase over one year even reached 3.9%, and in Spain, 3.3%. The phenomenon is not only European, it is global: in the United States, inflation stood at 5.4% in July over one year. The surge in prices is even more marked in the large emerging countries: in Brazil it is 9%, in India 5.3%, in Russia 6.5%.

This feverish surge is due to the global economic recovery, which is leading to higher prices for energy and raw materials. A barrel of crude oil is now trading at $ 70 when it fell to $ 35 in October 2020; copper took 42% in one year; aluminum 56%; wheat 33%… The soaring prices are also explained by the disorganization of supply chains which leads, for example, to shortages of electronic components in the automobile and increases the cost of maritime transport.

Compared to neighboring countries, France remains little affected, in particular thanks to the fact that a large part of electricity production is of nuclear origin. “In August, we are at 1.9% inflation, almost twice the level regularly observed in recent years”, indicates an expert from INSEE. He explains this increase by the increase in gas prices (+ 27% over one year) and fuels (+ 23%).

It also evokes a statistical distortion linked to the balances. “In 2021, the sales took place in July, while in 2020, in the context of the Covid pandemic, they had been delayed until August. This creates a calendar effect: the latest index shows a price increase of 4% for clothing and 7% for shoes. But we compare a month without sales with a month when the products were on sale. We will have to wait until September to see if this increase is confirmed ”, indicates the statistician.

Fresh products, whose prices rose 6.5%, are not spared. “There is undoubtedly an effect of freezing”, considers the person in charge. At this stage, there is therefore every reason to believe that this increase will be “Temporary and cyclical”.

It is also the analysis of most central bankers and European leaders. François Villeroy de Galhau, Governor of the Banque de France, repeated it on August 30 on BFM Business: “We believe that there is no risk of a lasting slippage in inflation for the euro zone. These are temporary surges, associated with this strong economic recovery and supply difficulties ”, he said.

However, even temporary, this start of fever on prices feeds in France the debate on the loss of purchasing power, in this period of back to school and while the electoral campaign is looming.

The subject is all the more sensitive as households still tend to estimate that the price increases are stronger than the index says: “When you ask consumers about the real level of inflation, half of them (53%) admit to having no idea; 26% tell us that inflation is above 5% and 21% think it is below 5%, notes Boris Descagerra, associate director of ObSoCo (society and consumption observatory). The very large majority of French people do not follow the actual changes in inflation and base their perception of the evolution of prices on that of their own budget constraint, which tends to intensify in particular due to the multiplication of new posts of expenses. “

Economists publish averages. They calculate that, thanks to massive state support, the purchasing power of households was generally preserved during the health crisis. The French have even accumulated 157 billion euros in additional savings between early 2020 and mid-2021, according to the latest figures from the Banque de France.

The reality experienced by each French person is different, because it depends on their activity and their income. “For some households, the issue of purchasing power has grown stronger. The health crisis has caused an amplification of socio-economic divisions. The most precarious households became poorer while the better-off took advantage of the slowdown in activity to save ”, Boris Descagerra analysis. In fact, a person who lives in the provinces, uses his car a lot, has experienced a period of partial unemployment or works under the status of autoentrepreneur will have suffered more from the pandemic crisis than an executive who has teleworked.

This is why the union officials received at Matignon at the beginning of September insisted to the Prime Minister on the need to increase low wages and the index point for civil servants. This is also why the issue is of concern to presidential candidates. This is the case on the left, with Fabien Roussel, Communist candidate, who took a stand for a minimum wage of € 1,800 gross. But this is also the case on the right, with Valérie Pécresse who is running for the Republicans primary by including in her program a 10% increase in all salaries, financed by a reduction in charges.

Faced with this offensive, the government refers to the employers and argues that it has already taken many measures to improve the purchasing power of the French, in particular by increasing the activity bonus, an income supplement paid by the Caisses family allowances for people with low wages.

An automatic increase in the minimum wage could still occur. It is provided for by law when inflation reaches 2%. INSEE is due to publish the final price increase index on September 15. If the figure, provisionally estimated at 1.9%, finally reaches 2%, the minimum wage will therefore drop to 1er next October from 1,554 to 1,586 € gross monthly.

For now, the government does not plan to go beyond: “Giving a boost to the minimum wage is also giving a knife to the recovery of employment”, thus ruled, on September 6, the Minister of the Economy, Bruno Le Maire. He preferred to invoke other devices, such as the energy check now paid to more than 5.8 million households, and which is according to him “One of the appropriate solutions” in the face of inflation.

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