Unlike their European counterparts, US companies increase their prices in proportions much higher than the rising costs they suffer, explains Natixis’ economist leader.
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In the euro area, inflation, 5.1% in January, is almost exclusively fueled by the outbreak of energy rates (+28.6%, according to Eurostat), explains Patrick Artus, Chief Economist of Natixis.
How does the rise in prices in the United States differ from that observed in Europe?
On the 7.5% inflation recorded across the Atlantic in January, three points are linked to the increase in business margins. It is a typical inflationary behavior, reminiscent of the 1970s: US companies increase their prices in proportions well above the rise in commodity costs, component shortages or energy. As many are in a monopoly situation in their area or sector, they take advantage of it. Example: The rates of used cars sold by dealers have bung 50% compared to before the pandemic. And we observe that this price increase significantly feeds the rise in wages.
The same phenomenon occurs in the euro zone?
No, the increase in prices in the euro area does not have the same springs as in the United States. Inflation of 5.1% in January is almost exclusively fueled by the outbreak of energy rates (+28.6%, according to Eurostat). With, however, an exception for France, where blocking at 4% of the increase in the regulated electricity sales tariffs limited the rise.
If it is already the case in the United States, we do not observe the formation of an inflation-salary loop in Europe at the moment, namely where companies reflect rising costs on their prices, And where employees require increases that in turn fuel rising prices. In France, wage progression should be 2.5% only in 2022 in the wake of collective bargaining, compared with 1.5% in 2021.
In these conditions, the European Central Bank does not have an interest in increasing its key rates, as planned to do the US Federal Reserve (Fed). Especially since, unless disasters, all non-salary costs (energy, transport, raw materials …) should have found, in June 2022, its June 2021.
We observe despite A significant increase in wages in some European countries …
Yes, especially in Germany. But these increases are not related to an inflation-wage loop: they are the result of a real scarcity of labor in certain sectors, especially in the industry, much more than in France. The more we go to the east of Europe, the more these recruitment difficulties are strong. This is also due to the fact that, from the pandemic, global demand has changed nature. It carries a lot more about the goods (and therefore, the industry) than on services.
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