Last week, INSEE published the provisional results of the consumer price index (CPI) for April. Eurostat also published the flash estimate of the harmonized consumer price index (HICP) for April for the whole euro area.
If inflation has fallen since the high plateau of around 6% year-on-year (for the CPI) reached between summer 2022 and spring 2023, its decline could be slower in the future, and even bumpy. Inflation could, in fact, rise slightly in May and July due to base effects on energy prices (which had fallen a year earlier). In addition, services inflation, the main contributor to total inflation since the fall of 2023, should prove relatively persistent in line with nominal wages still rising in this labor-intensive sector.
Using the HICP, which allows a comparison of inflation rates between different European countries due to a harmonized methodology, French inflation is stable in April, at 2.4% over one year (as in March) . The fact that the annual change in the CPI is decreasing, while that of the HICP remains stable, may seem surprising at first glance. However, it is linked to methodological differences between the two indicators. For health products and services, the HICP only takes into account the remainder payable by households after social security reimbursement, unlike the CPI which takes into account the ʺgrossʺ price (before any reimbursement). The doubling of medical deductibles on March 31 could thus explain the increase in the gap between the annual shifts of the CPI and the HICP in April (see the latest economic report from INSEE).
In April, inflation in France is the same as in the euro zone (in the sense of the HICP) since March, at 2.4% year-on-year. German inflation, which increased slightly compared to March (+0.1 point) also stood at 2.4% over one year. In Spain, inflation is higher and increasing (+0.1 point to 3.4% yoy), while in Italy it is significantly lower and falling this month (-0.2 point at 1% in ga). France thus appears in a middle position compared to its major neighbors. On the other hand, it displays cumulative inflation since before the health crisis (17.3%) which is significantly lower than the euro zone (20.8%), Spain (19.6%), Italy (20. 2%), and especially Germany (22.6%). This observation is also valid for underlying inflation1 (which corresponds to the underlying trend in inflation, excluding volatile prices), based on March figures (April figures are not yet available for all countries).
Our opinion – The disinflation process is a key element of our scenario. It should generate gains in the purchasing power of wages, thus stimulating the rebound in household consumption, which we see as the engine of growth in 2024 and 2025. Household consumption has finally already rebounded a little since the second half of 2023. This is what the first estimate of the quarterly national accounts for the first quarter of 2024, and the revisions made on this occasion to the past, reveal to us (see our publication ʺFlash GDP: slight acceleration of GDP in the first quarter 2024, at +0.2%, as expectedʺ). Household consumption thus increased by 0.5% in the third quarter of 2023, slowed down to +0.2% while continuing to increase in the fourth quarter of 2023, and increased again in the first quarter of 2024, to +0, 4%. In particular this last quarter, the consumption of goods is recovering slightly, driven in particular by the rebound in food, and despite the drop in spending on transport equipment linked to the tightening of the conditions of ecological bonus and penalty schemes for new cars. The consumption of services is also still dynamic.
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1 Within the meaning of the HICP excluding energy, food, alcohol and tobacco
Article published on May 3, 2024 in our weekly World – News of the week
