In its latest economic update, INSEE warns of the acceleration of inflation, against a background of sluggish growth. But do not foresee a recession. More and more economists, however, think that we are in a “war economy”.

Yesterday, INSEE provided an update on the economic situation. And its economists walk on eggshells…

We feel that they don’t want to demoralize us and that they cling to positive signals. There are still a few…

First, they recall that they had anticipated the sharp slowdown in growth that has been observed since the beginning of the year. In the hotel and catering industry, for example, it is explained by the Omicron wave in January, but they note that the sector is already experiencing a real catch-up.

The same for the automobile, all that is missing are the chips, the famous semi-conductors, for the industry to restart. No recession expected. Above all, INSEE notes that employment is resisting and that the morale of bosses, and their investment desires, remain solid.

But there is also bad news…

Yes the most worrying is the soaring prices. The statisticians have looked at the long series and we see that agricultural production prices, that is to say the price of products when they leave the farm, are up 69% over one year.

Prices in industry, excluding energy, rose by 11%. This is unheard of since INSEE began collecting this type of data in the 1990s.

And that obviously means that inflation will continue to rise: it will exceed 5% in the middle of the year, to 5.4% in June. But it could have been a lot more. Without the government's energy check and the 18-cent rebate on fuel: inflation would not be 5% but would be 7%. That said, even with this state effort, households will lose 2% of purchasing power.

This observation is for the beginning of the year, but what awaits us now?

All of this has brought household morale down to the same level as during the Yellow Vests crisis, that is to say very low. Concretely, this means that they put their major purchases on hold and that they will remain seated on their savings, and in particular the savings accumulated during the Covid.

So what can we do to reassure them? INSEE says nothing about this, it remains very neutral. But we hear more and more, among economists, the idea that European governments must now clearly state that we are in a “war economy”. And explain how we distribute the necessary effort, to pay the additional cost of energy or rearming.

Do you need European support? A big loan, what would the better off take out to help the poorer ones? A general wage increase? A price framework? Olivier Blanchard and Jean Pisani-Ferry make proposals in the review Great ContinentDavid Baverez, in Le Figaro or Daniel Cohen, in the next issue of The Obs. On newsstands the day after tomorrow.

And here are the links to find them: