Price increases, inflation

FRENCH’S BUYING POWER.

BUYING POWER,

PRICE INCREASES,

INFLATION AND DIVIDENDS.

After the crisis of 2020, the rebound of 2021 exceeds expectations. It shows 7% growth and brings the French economy to a higher level than before the crisis, underlines INSEE. For its part, the SMIC will increase by 3% in January 2022. Then it will be set at 1,269 euros net for 35 hours compared to 1,230 euros in January 2021. However, as of the end of November 2021, 8 out of 10 French people feel that their buying power has deteriorated over the last 12 months.

French’s buying power, the standard of living is increasing.

However, from 2017 to 2021, the incomes of the French are increasing by 8%. Thus, according to the Ministry of the Economy, all strata of the population are gaining in living standards. Thus, the 10% most modest record an increase of 4% while the 10% richest, reach 2%. Finally, for the others, the gains vary between 1.8% and 2.6%.

Nevertheless, as of February 18, 2022, the growth rate is now +3.2%. So obviously, the economic situation is moving.

Safeguarding jobs.

France fared better than others during the Covid-19 pandemic. Paul Krugman, Nobel Prize in Economics, said in an article published on January 14, 2022 by the New York Times. However, let us recall that it is the governmental policy of whatever it costs that is the source of this performance. Thus, with the 60 billion euros of spending in 2021, the public deficit is now close to 7% of gross domestic product, GDP. And France is thus preserving both the income of households and the financial situation of its companies.

French’s buying power, the contraction of the living expenses of families.

In 2021, for 83% of French people, purchasing power is one of their main concerns, according to a PGC-FLS study by Kantar France.

The INSEE effectively confirms in December 2021 the growth of the inflation rate to 2.8%. Admittedly, this is 2.8% for the entire basket of French consumption, but energy is increasing by 18%. And within energy, gas is overheating at 50%. Moreover, we evaluate our standard of living and our buying power on the basis of what we have left after forced expenses. So, in fact, these are very sensitive expenditure items that are in action. And they affect modest families much more than wealthy households.

It’s clear that the remaining income, especially for the most modest families, is shrinking and therefore we are experiencing it particularly badly. Our feelings far exceed the reality of the figure, which is only 2.8%. Philippe Moati, Professor of Economics at the University of Paris, co-founder of ObSoCo, the society and consumption observatory.

PGC–FLS is the consumer packaged goods and self-service fresh food market. And Kantar is a world leader in data, research and consulting.

Fuel prices are rising.

A liter of diesel is now €1.67, compared to €1.31 last January, according to figures from the Ministry of Ecological Transition. So an increase of 24% in one year. Indeed, in March 2020, these prices collapse because of confinements and travel restrictions. But since 2021, the increases are real and exceed pre-crisis levels. As a result, energy price increases continue to drive the consumer price index to new highs.

French’s buying power, the soaring price of gas.

On the other hand, the government is freezing gas prices in the face of its sharp rise since 2021. Otherwise, we would be facing rates 38% higher than those of October 2021. Because we are now dealing with a reduction in European gas production. For the record, we must go back to the years 2005–2012 to see an increase of this magnitude.

Increase in the price of basic foodstuffs.

Finally, according to INSEE, food prices are experiencing inflation of 2.2% from September 2019 to September 2021. And in more detail, fruit and vegetable prices show a 9% increase since the end of 2019. Indeed, the climatic hazards of 2021, freezes, droughts and floods completely destabilize the various balances between supply and demand.

Furthermore, according to INSEE, the general price increase of 2.8% in 2021 is due to the rise in energy and manufactured goods prices.

French’s buying power, beyond the figures, the realities of wages.

Indeed, the French Observatory of Economic Conjunctures, OFCE, establishes the average gain in purchasing power per year and per consumption unit at 334€ for the period 2018–2022 against 76€ per year in 2016. And we are talking about averages. Because a gain of 334€ on a SMIC does not have the same characteristics as on a salary of 5,000€. And obviously, this is what probably explains the feeling between the global figures and the experience of a large number of French people.

SMIC Minimum Interprofessional Growth Wage.

Difficult ends of the month for essential purchases.

Inflation is seriously straining the consumption budget of families. According to the February 3, 2022 Elabe survey for Les Echos, Radio Classique and the Montaigne Institute, a majority of French people admit to experiencing difficult end-of-month expenses since the fall of 2021. Indeed, 59% of French people estimate an increase in their expenses for three essential items such as heating, food and transportation.

French’s buying power, development of alternative trends.

Inflation and its impact on the price of consumer products are pushing brands to find solutions to remain attractive and competitive. Thus are developed :

• private labels
• the organic segment is down 4% in favor of local seasonal products;
• bulk products will reach 40% of household private labels
• hard discount is experiencing a revival, and sales of FMCG-FLS in discount stores such as Action and Noz are up +39%…

The savings of the French.

French people’s savings increase between 2019 and 2022 by 175 billion euros. This same population, able to save, invests 10% of its disposable income in real estate purchases. And in fact contributes to 15.8% of the growth.

The fact remains that the French have a war chest that is slow to find the items of expenditure.

French’s buying power, the good health of the labor market.

The employment rate reached 67.5%. Not seen in France since 1975.

Labour income has increased. In the current context, this is valuable. The income dynamic allows us to compensate a little for inflation. Mr. Stéphane Colliac, Senior Economist France at BNP Paribas.

The unemployment rate has been falling sharply since the fourth quarter of 2021, -0.6 points compared to the previous quarter. And according to INSEE figures from February 18, 2022, it is now at 7.4% of the working population in France excluding Mayotte.

Thus, the number of unemployed persons as defined by the International Labor Office, ILO reached 2.2 million, 189,000 fewer than in the previous quarter. In passing, it should be noted that its level today is lower than its pre-crisis level.

A brief typology of the job market.

Young people are driving the labor market. The youth unemployment rate has fallen sharply by 3.6 points to 15.9% of the active population. In fact, to find these figures, one must go back to the end of the 1980s and 1990s.

On the other hand, the unemployment rate decreased by -0.3 points for those aged 25-49, to 6.8%, and remained stable for those aged 50 and over at 5.8%. Finally, the decrease is more significant for women, -0.8 points to 7.3% than for men, -0.4 points to 7.5%.

French’s buying power, the investments of French shareholders.

The financial results of various groups show exceptional profits. From Crédit Agricole to Thalès and Sanofi, between 54 and 55 billion euros are awaiting distribution to shareholders.

Dividends galore in large companies.

The shareholders of the world’s 1,200 largest companies will share $1.46 trillion in 2021. Clearly, corporate profits are exceptional and excellent. Moreover, the recovery is global, and large companies are in good shape. The best is yet to come as demand is more than real and raw material costs are soaring. We have observed that in these sectors there was a rise in prices, therefore a rise in revenues, therefore opportunities to pay more to shareholders, Christopher Dembik, Saxo Bank’s Chief Economist.