Inflation has finally come down. Indeed, according to INSEE, the rise in prices fell to 5.1% between May 2022 and May 2023. This represents a drop of 0.2% over one month. This drop in consumer prices can be seen in several sectors, particularly in energy and petroleum products. Food products are falling for the first time since September 2021. However, if this decrease seems to be good news, many French people risk being negatively impacted by this variation.
After a first revaluation of the Smic in January 2023, a second took place on May 1, 2023. The minimum interprofessional growth wage therefore experienced a mechanical increase of nearly 2.2%, which is equivalent to 1,747.20 euros gross per month. This increase is justified by the inflation rate in France. Indeed, as the government website specifies, “a revaluation during the year [is possible] if the consumer price index increases by at least 2% compared to the index observed during the last change in the amount of the minimum wage”. But depending on the fall in consumer prices could change everything.
“The inflation forecast used in this Economic Report does not imply a new automatic revaluation of the Smic before the end of the year, but we cannot exclude an upward surprise in price developments which would trigger one”, can we read in the INSEE economic note of June 15, 2023. It is therefore possible that no revaluation of the minimum wage is envisaged before 2024.
Nevertheless, “a” boost “decided by the government, apart from the price index (no additional increase to the mechanical revaluation has taken place since July 2012)”, specifies the government site. This information therefore supplements that of INSEE, which does not rule out a reversal of the situation. But what are the other consequences of disinflation?
The drop in inflation is likely to have repercussions on other factors. Indeed, households receiving the Smic are also eligible for the People’s Savings Account (LEP). However, this savings product should fall from August 1, 2023. For good reason, the latter is calculated from the evolution of prices. “The return on the LEP corresponds to the average annual inflation (excluding tobacco) over the last six months”, specifies Thibaut Lamy, investment and heritage journalist for Capital.
The next interest rate for the People’s Savings Account will therefore take into account inflation between January 2023 and June 2023. However, consumer prices should continue to fall between now and the end of June. According to INSEE predictions, these should reach 4.6%. But it is not the only savings product that is likely to be impacted by this decline.
From August 1, 2023, subscribers to the livret A should experience an increase in the interest rate. Indeed, the rise in interbank rates led to a revaluation of this rate. Thus, on August 1, the passbook A rate should drop to 4.2%. Nevertheless, this increase has a direct impact on banks and the social housing sector.
Consequently, “the governor of the Banque de France and Bercy are very likely to limit the revaluation of the preferred savings account of the French to 3.5%”, specifies Capital. The final decision for the Livret A should be announced in mid-July, when the inflation rate for the month of June will be revealed. Case to follow.