In France, no stagflation, but “modest growth”

Inflation which continues on its way, reaching up to 5.5% year-on-year in May-June, and growth of around 0.5% in the second quarter: the INSEE forecasters do not yet want speak of stagflation, as the zero growth recorded in the first quarter might lead one to fear. “Our scenario is rather that of modest growth”, assured Julien Pouget, director of the business cycle department, Monday, May 9. Stagflation is characterized by a “high inflation and lasting stagnant activity”he recalled.

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Christine Lagarde, the President of the ECB, also assured, on Saturday May 7, that this phenomenon, feared by economists, was not yet ” our reference “ and zone euros. “Although the unusual degree of uncertainty could mean a combined slowdown in growth and high inflation, the current situation cannot be compared to that of the 1970s”she explained in an interview with the Slovenian daily Work.


Stagflation or not, this first half of the year is, in any case, synonymous with a loss of purchasing power for the French: gross household disposable income, calculated per consumption unit (i.e. in taking household size into account), fell by 1.5% in the first quarter of 2022 compared to the fourth quarter of 2021. In the second quarter, it is expected to drop another 0.5% compared to the first three months of the year. The sharp fall in the first quarter is, in fact, partly explained by the fact that the inflation indemnity was paid at the end of December to the beneficiaries: by slightly inflating income at the end of the year, it accentuates the fall in purchasing power in the following quarter.

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This decline would have been even sharper without the measures put in place to limit the impact of inflation on the household budget, assures INSEE: the “tariff shield” on energy and gas prices, as well as discount at the pump have reduced inflation in France by two points since the start of the year. Without these measures, “Inflation would exceed 7%”, estimates the Institute of Statistics. But this impact is likely to be less in the coming weeks, because the rise in prices, initially concentrated on energy prices, is spreading more and more to other items of consumption, and especially food.

“Household consumption as a whole could be driven by a catch-up effect on services” Julien Pouget, director of the economic situation department of INSEE

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