The conflict in the Middle East and the risk of escalation in the Middle East do not cause inflation, a ceasefire will not cause disinflation: first of all, the price of oil has remained reasonable, helped by lower Chinese demand and prospects for bridging production in the event of lower production from Iran, then the increase in the price of transport (container shipping is diverted from the Red Sea to the Cape of Good Hope) does not bite into final prices unlike previous shocks since stocks of finished products are high, so this time they are cushioning the shock. As evidence of the lesser consequences of this shock compared to the Covid shock on global production, 24.2% of French companies in industry report encountering supply constraints only according to INSEE (December 2024 survey), while this level peaked at 52% in 2022.
The economic fundamentals predict a wise price dynamic in 2025. The business cycle is seized up, particularly given a lack of visibility and a persistently high savings rate. Inventories of finished products are high, which is a configuration that encourages companies, in order to sell off these stocks and maintain production at a satisfactory level, to contain prices as much as possible (amortization by the margin rate). For its part, the labor market is easing, recruitment constraints are less significant and wages are slowing down towards a mid-cycle level (close to 2.5% per year in France, 3% in the euro zone).
Inflation should therefore be close to 1% throughout the first half of 2025. The disinflationary forces are still at play but are running out of steam.
Trump: an inflationary singapore phone number list program in the United States, what shock wave in the Eurozone?
Donald Trump has signaled that he wants to increase customs duties; there are several effects to watch for the Eurozone:
i) a disinflationary effect: if the Chinese market has fewer outlets for its production in the United States, there is a risk that it will seek a source of growth in Europe, with low prices to conquer the market.
ii) an inflationary effect: first, even if the effect would be quite small overall (France imported 51.8 billion in goods and $27.3 billion in services in 2023), American products would become more expensive (increase in the cost of imports and other inflationary measures in Trump's program), recalling that the United States is France's 5th largest supplier (hydrocarbons, aeronautics, pharmaceuticals). Then, the increase in American customs duties could lead to a series of retaliations from the various economies that could end up degenerating into a "global trade war" in a context where fragmentation is already complicating world trade and calling into question a major disinflationary force of past decades. We refer to the ECB study on fragmentation, which points to strong inflationary risks ( Speech by Philip Lane, ECB, November 2024 ) and report on the work of the IMF which assessed the impact of the measures in D's program. Trump. Finally, the increase in the US-eurozone monetary yield gap, linked to the inflationary consequences of Trump's policy, is likely to strengthen the dollar against the euro: the euro is trading at 1.02 dollars compared to 1.08 before the election (see table showing the inflationary impacts).