Report
France: Why is there no inflation?
If we look at OECD countries as a whole, we understand why there is no inflation: real wages are rising markedly less rapidly than productivity and corporate profitability is increasing, so companies do not need to raise their prices to maintain their profits . But in France, on the contrary, real wages are rising faster than labour productivity: why are companies not reacting to this decline in profit margins by raising their prices? We can think of two explanations: The decline in the tax burden on companies and in interest paid on debt by French companies have offset the fall in profit margins and maintained the level of corporate cash flow, and this is true for interest on debt; Strong competition from other euro-zone and emerging countries is preventing French companies from raising prices in response to rising costs; this is likely and in line with the observed facts.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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