According to initial estimates from INSEE, consumer prices rose 1.4% year-on-year last month. The increase was only 1% in November and is mainly attributable to a rebound in the price of energy, but also food and tobacco.

While the recovery in inflation is driven by energy, food products and tobacco also contributed to this rebound

Bad surprise at the end of the year for the French but also for the executive. In December, consumer prices rose sharply. With an increase of 0.4% over one month, they show an increase of 1.4% year-on-year after 1% in November. This is the highest level observed since December 2018, when inflation reached 1.6% on an annual basis.

This December increase, if confirmed on January 15 when INSEE publishes its final figures, is bad news for household purchasing power. But also for the government, which risks seeing the expected effect of the announcement of the 2020 income tax cut for some 12.2 million households being diluted.

“Sharp rebound” in energy prices

In detail, the acceleration of inflation in December is mainly explained by “A marked rebound in energy prices […] in the wake of those of petroleum products ”, state statisticians specify. In fact, while they had fallen by 0.6% in November, in December they experienced a frank acceleration of 2.6%.

And the renewed tensions between Iran and the United States, following the American attack which led to the death of Iranian general Qassem Soleimani, risks accentuating this rise in the price of energy in the coming weeks. As of the announcement of this attack, the prices of a barrel of oil progressed from 3 to more than 4% whereas the day before they were oriented downwards thanks to the expected improvement in trade relations between the United States and China.

Food and tobacco on the rise too

The other factor that explains the resumption of inflation is to be found in the price of food and tobacco. For the second consecutive month, food prices increased by 2.1%, while those of tobacco posted an increase of 15.3% in December as in November.

At the same time, INSEE notes a seasonal rebound in the prices of services (with an increase of 1.4%) while those of manufactured products turn out to be a little less depressed than the previous month with a decline of 0.2%. on an annual basis, against -0.6% a month earlier.

Still over one year, the harmonized consumer price index, which makes it possible to compare all European countries on the same basis and is used by the ECB to monitor the price level on the old continent, is also accelerating. It rose 1.6% in December, after 1.2% a month earlier.