Inflation could exceed 4% in March, warns INSEE

If Western sanctions are hurting the Russian economy very badly, the French wallet is not spared by the war in Ukraine. Driven by soaring energy prices, inflation could reach 4% over one year in March, according to INSEE, after having already reached 3.6% in February. And in the second quarter, inflation could still climb around 4.5%, adds the National Institute of Statistics in its latest economic note, specifying that these forecasts are based on the assumption of a price of a barrel of oil which would remain at 125 dollars, i.e. its level reached at the very beginning of March.

“A shock of price, uncertainty and confidence”

The war causes “a shock of prices, uncertainty and confidence”, summarized Julien Pouget, head of the business cycle department at INSEE, during the presentation of this note. The latest INSEE surveys thus show a fall in the outlook for business activity, particularly in industry, with the crisis fueling inflation and difficulties in the supply of certain raw materials.

Similarly, households fear a drop in the standard of living in France and a deterioration in their financial situation, whereas traditionally, the surveys carried out just before a presidential election are conducive to optimism. To the uncertainties linked to the evolution of the conflict in Ukraine and its consequences, are added those on the Covid-19 epidemic, which is regaining vigor in China, explains the institute.