The first effects of the Middle East war have started to be felt on inflation in France: it surged to 1.7% in March due to the rise in energy prices, a trend whose extent remains uncertain for the coming months.
According to a provisional estimate published by INSEE on Tuesday, consumer prices in France increased by 1.7% year-on-year in March, after a 0.9% rise in February.
This inflation hike is mainly attributed to a significant rebound in energy prices and particularly oil products (+7.3% year-on-year compared to -2.9% in February), according to the National Institute of Statistics and Economic Studies.
Economists expected this inflation jump in March, as the Middle East war has driven up gas, oil prices, and consequently fuel prices, since it started on February 28.
“There is no surprise with this figure, largely explained by the rise in energy inflation, which is back in positive territory,” reacted Maxime Darmet, an economist at Allianz Trade, to AFP.
“The figures published today confirm that a first inflationary wave is already underway,” also noted economist Charlotte de Montpellier from ING.
– Effects of “second round” –
For economist Sylvain Bersinger, these data also show that “the consequences of the war in Iran are already being felt,” even though “the inflation shock has not yet had time to spread throughout the value chain.”
In detail, year-on-year, service prices have slightly increased, like tobacco, while prices of manufactured goods are declining faster than last month.
The harmonized index of consumer prices (HICP, which allows comparisons between different inflations in the eurozone) increased by 1.9% year-on-year in March, after 1.1% in February.
If the surge in energy prices has not yet impacted other prices, economists anticipate it for the upcoming months.
– “Duration of the shock” –
According to Maxime Darmet, “the second effect should be on gas and electricity bills,” and “if the conflict lasts beyond the end of April-beginning of May, there is a risk that we will start to see effects on food prices and on goods prices as well.”
“The second-round effects through transportation costs and certain industrial goods should not be far behind,” noted Charlotte de Montpellier, even though “the risk of an inflationary spiral remains more limited in France than in the rest of the eurozone.”
In the entire eurozone, inflation rose to 2.5% year-on-year in March, up from 1.9% in February, the highest level since January 2025, according to an initial estimate released on Tuesday.
For the future, economists emphasize that the extent of the shock on inflation and the French economy will depend on the duration and intensity of the conflict.
François Geerolf, an economist at the French Economic Observatory (OFCE), analyzed that “everything will depend on the duration of the shock.”
However, in the long term, the increase in inflation “could lead to a slowdown in growth, and household purchasing power will be affected if the government does not intervene,” he emphasized.
INSEE estimated last week that France should experience “a significant resurgence in inflation,” crossing the 2% mark in the spring, while revising down its growth forecasts for the first and second quarters to 0.2% from the previously projected 0.3%.
A disappointing turn for the economy, household spending on goods significantly declined by 1.4% in February, according to figures released on Tuesday.
“A cold shower” for Maxime Darmet, who believes that “consumption is entering the conflict on a very weak basis.”
