Rising prices: the French must prepare for the worst

Rising prices: the French must prepare for the worst

the essential
Due to inflation, the annual food expenditure of the French could increase by 224 euros per person in 2022 according to an Allianz Trade study published this week. While the government is thinking about setting up a food check and the opposition a “Robin Hood” plan, the French are finding solutions to save on their shopping.

The rise in prices noted for several months and fueled by the war in Ukraine which triggered energy and food crises does not seem to be about to stop. In its latest report, the International Monetary Fund (IMF) predicts that inflation is expected to be highest in developing economies, where price inflation could reach 8.7% on average this year while in developed countries, this figure should be 5.7%. In France, where inflation is lower than in some of our neighbors such as Germany, INSEE measured that in April 2022 the prices of oil and industrial raw materials fell, but that those of food raw materials are dynamic . “Although slowing down, the prices of food commodities in euros rose again in April (+5.1% after +9.2% in March). The prices of meat (+7.0% after +8.6%) and seafood products (+9.3% after +10.4%) remained very dynamic. The prices of oilseeds slowed markedly (+1.3% after +22.0%) as did, to a lesser extent, those of cereals (+5.1% after +11.5%) and those of sugar (+4 .7% after +8.1%)”, details the Institute.

The French, who have noticed this price increase while shopping, multiplying the tricks to save money, must prepare for difficult days. “The worst is yet to come for European consumers” warned credit insurer Allianz Trade this week in a study on food inflation. “For the moment, the rise in the price of agricultural foodstuffs has not fully passed on to the selling prices charged by food distributors. Indeed, while manufacturers in the European agri-food sector have increased their prices by +14% since the start of 2021, food distributors, on the other hand, have only increased their prices by +6%. Thus, less than half of the inflation in the prices of food products observed upstream has been passed on to the prices at which these products are sold to the final consumers, the households”, explains Allianz Trade.

The prices of food distributors could increase by +8.2% in France

“Faced with the current situation, with declining sales volumes and particularly high inflation, the profitability of European food retailers is under pressure. They will have no choice but to pass on this cost increase to their sales prices while trying to preserve their market share in a very competitive sector. For the end consumer, there is no doubt that the average price of the basket will continue to increase,” explains Aurélien Duthoit, sector advisor at Allianz Trade.

The impact of inflation on the food budget

The prices of European food distributors could therefore increase by +9.4% this year. “The German consumer will be among the most affected, with an increase in food distributor prices estimated at +10.7% in 2022, and therefore an increase in annual food expenditure estimated at +254 euros over one year. In France, the prices of food distributors could increase by +8.2%, which would generate an increase in annual food expenditure of +224 euros per person this year, for a total reaching 2,963 euros”, explains Aurélien Duthoit.

Faced with this surge in prices, which is seriously undermining the purchasing power of households, governments are looking for a solution, all the more so since inflation has become a major concern for populations all over the world, as the surveys of the Statista’s Global Consumer Survey (inflation is mentioned by 50% of respondents in France, Germany, United Kingdom, by more than 60% in Belgium).

In France, inflation becomes an electoral issue for the legislative elections

Several states have decided to react by regulating the energy sector and adopting support measures. Spain and Portugal have chosen to extract gas and electricity prices from European mechanisms. In Germany, 130 million euros in subsidies have been released for low-income households to reduce their energy bills. Olaf Scholz has also set up a check for 100 euros to increase alimony and a monthly reduction for public transport up to 9 euros. The United Kingdom on Thursday unveiled a new 15 billion pound aid package to deal with the impact of the cost of living on disadvantaged households.

In France, the rise in inflation is hitting the legislative election campaign head-on and is becoming an issue, particularly between the presidential majority and the Union of the Left (Nupes).

After the tariff shield on gas and electricity, the additional boost of 100 euros from the energy check system or the 18-cent rebate on fuel, the government, which since the autumn has committed 26 billion euros in expenses, prepares for the end of June – if the presidential majority is renewed – an amending budget which should in particular lead to the distribution of a food check.

The “Robin Hood” plan of the Union of the Left

The Union of the Left presented its plan for purchasing power on Thursday, the bill of which, already drafted, is ready to come into force immediately if the Nupes obtains victory in the legislative elections. “The central idea is to make inflation pay for profits rather than wages, and to avoid the contamination of inflation from one sector to another”, in particular by “blocking prices” , explained Jean-Luc Mélenchon.

In addition to the increase in the Smic and pensions, the revaluation of wages, the freezing of the prices of basic necessities and the control of rents, there is the ban on electricity and gas cuts and a cap on the prices of collective transportation. “It’s a legal Robin Hood operation,” summarized Mr. Mélenchon.