After more than a year and a half of rising inflation, the peak seems to have been reached in the United States, where price rises slowed in October. In Europe, the inflation peak could be reached by the end of the year, but disinflation (gradual decline) will be slow and many uncertainties remain.
Consumer prices down in the U.S.
Althoughinflation remains high in the United States, it seems to be starting to ease after more than a year and a half of almost continuous increases in consumer prices. In October, inflation eased to +7.7% year-on-year, from +8.2% in September.
Prices for rents, medical services, used vehicles and household appliances fell slightly or stabilized compared to September, making it likely that the pace of the US central bank's rate hike, which reached 4% in early November, will slow.
In the opinion of the Fed, many economists, investors and households alike, peak inflation appears to be over, or on the verge of being over, in the United States, heralding a year of disinflation in 2023.
Uneven inflation across the euro zone
In the eurozone, consumer prices rose by a further 10.7% year-on-year in October, reaching their highest level ever. The increase in inflation is largely due to the rise in energy prices, up 42% on average over the last 12 months. Food prices are not to be outdone, rising by 13% year-on-year in October, as are industrial goods prices, which rose by 6% over the same period.
Inflation is progressing unevenly in the various member countries: it is most contained in France, thanks to measures taken by the public authorities, while in the Baltic States it is peaking at over +20% year-on-year.
Each member state applies a different fiscal policy, which widens the gap in terms of price rises. In Germany, state support represents over 7% of GDP, compared with just 1% in Estonia. While energy prices fell in Germany and Spain in October, the increase in regulated tariffs pushed them up in Italy.
These disparities will give rise to other difficulties, notably in terms of the competitiveness of each member state: the uneven rise in inflation from one euro zone country to another will lead to highly variable wage increases.
Europe approaches inflationary peak
Nevertheless, all member states are hoping, like the United States, to quickly surpass peak inflation. According to Paolo Gentiloni, European Commissioner for Economic Affairs, this could be the case by the end of the year, even if the highly unstable geopolitical context prompts caution.
However, several signals suggest that Europe is heading for a gradual easing of inflation.
Firstly, the cost of a barrel of oil has fallen: it now stands at between $80 and $100, compared with $100 to $120 in March-April. The price of gas, although higher than before the war in Ukraine, is no longer at its highest level. This downturn was more than expected, given that rising energy prices account for 40% of inflation in the eurozone, and are responsible for a cumulative loss of revenue of 3.3% of the European Union's GDP.
In addition, international markets are witnessing a decline in agricultural commodity prices, which should lead to lower food prices. In addition, the current fall in producer prices in China will also have a positive impact on consumer price indices in the USA and the Eurozone in the months ahead. Finally, the trend is for international value chains to return to normal, and wage increases have remained limited in the eurozone.
While all the signs are that Europe, like the United States, is approaching peak inflation, disinflation is likely to be slower on this side of the Atlantic, due in part to the measures introduced by several member states to boost purchasing power, which are having the effect of supporting demand. According to many economists, inflation could fall back below 5% in autumn 2023, and then settle at around 2% in 2024.
However, while economists agree that consumer prices will fall in the short term, they believe that inflation could well be higher in the long term than before the crisis, due to the energy transition and the tense geopolitical context. This situation could prove favorable for certain countries, such as France, which would then have the opportunity to gradually reduce their public debt.