Inflation: soaring food prices should slow down sharply on the shelves by the end of 2023

Chicken, fish, fruit, chocolate, sodas... Will the surge in labels on supermarket shelves finally subside in the coming months? This is, in any case, the opinion of INSEE. In their latest forecasts, published on Thursday, national statisticians note a “decline in inflation”, which should continue by the end of the year. A welcome "inflection", expected by households... But which should not result in a decline in prices for the moment.

If energy was the first culprit behind the explosion in prices last year, it has since been replaced by food, reminds INSEE. “Food inflation has reached unprecedented levels. It forms the most important contribution to overall inflation, ”notes the head of the economic synthesis division at the institute, Olivier Simon. This observation can be explained above all by the increase in agricultural prices, which jumped “by 23% in 2022 compared to 2021”. At the same time, the rise in energy prices and that of wages in the sector have contributed to the rise in prices.

The "significant increase in unit margins" among food manufacturers also contributed to this dynamic last year, note national statisticians. “Since the second quarter of 2022, the observed price has exceeded the equilibrium price, being at much higher levels, which would suggest a marked reconstitution of the margins of the branch”, explains the note. An observation that will give food for thought to distributors, who have been denouncing the margins of the food giants for a few months. The increase in margins, however, comes at a time when the players had, on the contrary, tended to compress their margins, in 2021, to cash in on the increases in their costs. In addition, manufacturers could “partially” normalize their margins “from the third quarter of 2023”, notes INSEE.

Still, the peak of food inflation could be behind us. “Downside pressures” are now exerted, while energy prices have retreated, causing, in turn, the prices of production of products. "In April 2023, the agricultural producer price index is 7% below its level of April 2022 [...], reflecting recent movements in world prices of agricultural raw materials", cites the study as an example. . This movement should be accelerated by the opening of negotiations between manufacturers and distributors, under the watchful eye of the State.

Over the last six months of the year, therefore, the situation is mixed. "Consumer prices of food products could slow down significantly, without necessarily falling on average," summarizes INSEE. Over twelve months, at the end of 2023, inflation should range between 7% and 8%, a level that is still high, but twice as low as today. “Surrounded by uncertainties”, this forecast is however conditioned on several factors, including oil prices, those of agricultural raw materials or the results of negotiations within the sector, nuance Olivier Simon.

While we should not expect a massive drop in prices on the shelves, the momentum observed for more than a year should therefore ease. "There is no drop in absolute terms", insists Denis Ferrand. Rexecode's managing director points to the "lag effect" at play: prices on the shelves move with a lag time relative to market prices and upstream disruptions. The "upward shock" of 2022 was therefore reflected with a delay, in 2023, in prices, and the backlash will again take time to be felt. However, there will be no decline, only a slowdown, all the factors in the producer price - wages, energy, in particular - having been pulled up.

Inflation has "changed in nature", also notes the boss of Rexecode: centered on energy at first, it then spread throughout the economy, including food and manufactured goods. . It now affects more and more services, and is expected, on this item, at 4.2% at the end of December, a continuous increase compared to 3% in May. An acceleration due to “the rise in wage costs”, explains Olivier Simon. However, services constitute “50% of the household consumption basket. This is the position that we never talk about, when it is the most important and it will experience a strong drift, ”worries Denis Ferrand. The rise in prices has therefore not finished straining the household budget.