In Europe, behind the autumn in inflation, the decline in company income | EUROtoday

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The strategy of disinflation continues in Europe. In March, inflation within the euro zone was 2.4%, in comparison with 2.6% the earlier month, in response to knowledge revealed Wednesday April 3 by Eurostat. This is the bottom degree of value will increase since July 2021 (tied with November 2023).

The phenomenon impacts virtually all European nations. Inflation in March was 2.4% in France, 2.3% in Germany, 1.3% in Italy, 3.2% in Spain. The decline in vitality costs, which has been in full drive for a yr, partly explains this slowdown. More just lately, meals costs have stopped hovering: for unprocessed meals, they’re even down barely for the primary time, by 0.4%. As for so-called “underlying” inflation (excluding vitality and meals, that are extra unstable), it has fallen under 3% for the primary time in additional than two years, at 2.9%.

The strategy of disinflation does in fact not imply that costs are falling (they’ve gained a complete of 15% within the euro zone because the summer time of 2021), however merely that their development has now stabilized. For the European Central Bank (ECB), whose goal is to keep up inflation at 2%, that is excellent news. “These data point to inflation which will be very close to the 2% objective in the second half of the year”, estimates Andrew Kenningham of Capital Economics. A primary minimize in rates of interest on the ECB assembly in June now appears to be the consensus.

Companies in issue

In addition to vitality and meals, one of many explanations for the phenomenon of disinflation comes from the decline in company income. “There are still super profits in the energy sector, but elsewhere, the surge in margins is over”, notes Eric Dor, director of financial research at Ieseg, a enterprise college. He reviewed the margins of French firms, as they seem within the state accounts saved by the National Institute of Statistics and Economic Studies. In the fourth quarter of 2023, these have been down by 0.24% in comparison with the fourth quarter of 2022 for manufacturing firms, by 2.57% for agriculture, by virtually 5% for transport, and even by 0. 85% for family providers.

Week after week, the difficulties going through companies are highlighted by the information. Kingfisher, the corporate that owns Castorama, has simply revealed a decline in its revenue margin from 7.1% in 2022 to five.8% in 2023. It has introduced a significant value discount plan. The luxurious group Kering fell sharply on the inventory market after the poor outcomes of its Gucci model, whose gross sales fell by 20% within the first quarter.

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