The consumer price index had not reached such a level in France since December 1985 (4.7% over one year), indicated the National Institute of Statistics and Economic Studies (Insee ) Thursday at AFP.

“It was expected but the increase was even greater than expected,” notes Charlotte de Montpellier, economist at ING.

In February, the indicator stood at 3.6%, already a record since 2008.

As for the harmonized index (HICP), which serves as a basis for comparison at European level, it also soared, to 5.1% compared to March 2021, detailed INSEE in its first estimate of the inflation in March 2022.

As in previous months, the sharp jump in energy prices (+28.9% over one year) explains most of the rise in prices, while the war in Ukraine has caused the price of hydrocarbons to soar.

But food, and more specifically fresh products (+7.2%), also fueled the movement.

The cost of services increased much more modestly, at 2.3% over one year, while that of tobacco slowed down slightly (-0.1%).

Aggressive measures

Despite inflation above 2% year on year every month since September 2021, France remains better off than its neighbors of comparable size.

Spain on Wednesday announced inflation of 9.8% over one year in March, again a peak not reached since 1985.

Germany recorded a price increase of 7.3% between March 2021 and March 2022. Inflation had not been so dynamic since November 1981, in the former West Germany.

Inflation in France AFP

“French inflation has been lower than German and Spanish inflation for several months, it is partly due to the tariff shield”, explains to AFP Hélène Baudchon, economist at BNP Paribas.

The measures put in place by the government to limit the rise in energy prices, more "aggressive" than in other European countries, are "the main reason" for this French exception, confirms Charlotte de Montpellier.

“INSEE estimates that, in February, these measures enabled inflation to be 1.5 percentage points lower than it would have been without them. The effect is probably similar for the month of March and for the following ones”, she continues.

And "as energy will remain the main driver of inflation, the French exception will remain", anticipates the economist.

Peak

The French labor market is also less tense than that of Germany or the United States, where recruitment difficulties have generated strong wage increases, which in turn may have generated dynamic inflation - 7.9% over one year in February in the United States, the highest since 1982.

In France, to take this high inflation into account, the minimum wage, the SMIC, will mechanically increase on May 1 between 2.4% and 2.6%, according to an estimate by the Ministry of Labor contacted by AFP on Thursday.

Despite these exceptionally high levels of inflation, however, the movement could approach its peak.

INSEE anticipated in mid-March, in its monthly economic note, inflation stabilized around 4.5% in the second quarter of 2022.

"The 5% mark for the national inflation indicator could be exceeded in the second quarter," said ING, which then expects a rapid drop in consumer prices.

With the loss of purchasing power caused by inflation, and low household morale, "demand will lose momentum, which will impact the power of companies to set higher prices", anticipates the Bank.

The chief economist of the European Central Bank Philip Lane was also reassuring on Thursday, stressing that the ECB expected inflation to stabilize around 2% in the medium term in the euro zone.

Estimates which could become clearer after the publication of the final figures from INSEE for the month of March, scheduled for mid-April.

As of Friday, a first estimate of inflation in March in the euro zone should be published.

© 2022 AFP