It’s a respite… which should be short-lived. Inflation decelerated slightly in France in December, according to the latest INSEE statistics published on Wednesday 4 January. Over one year, the rise in retail prices fell to 5.9% at the end of the year against 6.2% a month earlier. A slowdown largely due to the decline in energy prices and in particular oil prices.
Still, this little breath of fresh air is likely to be short-lived. Between now and spring, the companies which signed new energy supply contracts at the end of the year – i.e. almost half of industrial companies according to a recent INSEE study – will begin to pass on these increases in tariffs on their selling prices. In the food industry, the drift in prices could even get carried away. Added to this is the 15% increase announced since the fall in gas and electricity prices for individuals. All in all, inflation could rise to 7% in the first months of 2023… unheard of for 40 years!
In Germany, where the hyperinflation that ravaged the country a century ago under the Weimar Republic, is still on everyone’s mind, price drift is turning into a national trauma. On average, over the whole of 2022, inflation stands at 7.9%: this is the highest figure since the creation of the Federal Republic of Germany after the Second World War.
Trouble, on both sides of the Rhine, as in the rest of Europe, we will not return to the world before: the world before the war in Ukraine and before the Covid. In reality, the parenthesis that opened in the early 1990s with the great phase of globalization, the waves of relocation and China’s entry into the World Trade Organization, has closed. And we have permanently entered a system of inflation that is markedly higher than what we have known over the past thirty years.
For two reasons. The first – and this is the great lesson of the recent sequence – is the need to produce less far away, to have less fragmented production chains, to be more sovereign, more autonomous and more resilient in certain sectors: we can still see it today with the shortages of medicines which are multiplying in Europe. This quest for sovereignty will take time, and above all, consumers will have to agree to pay more. The second reason is the ecological transition. And there too, the need to integrate into the prices of all the products we consume, the cost of the ton of carbon emitted to produce them.
The consequences of this new inflationary regime are multiple. First, we will have to learn to live with higher interest rates. The European Central Bank (ECB) has not finished tightening its monetary policy. And this from the first meetings in February and March. The “magic” money is over and the highly indebted States will realize it fairly quickly. Next and above all, the question of wages and that of the distribution of the wealth created will be at the heart of the concerns of households and employees in the years to come. But that, business leaders have not necessarily realized.
