The inflationary surge observed in 2021-2023 has brought the challenges of the short-term forecasting of inflation back to the forefront. While the macroeconomic determinants of inflation are relatively well known (oil, expectations, wage costs, competition, etc.), month-to-month price formation mainly reflects decisions taken at company level. Thus agents’ opinions on prices collected during INSEE’s monthly business tendency surveys can clearly provide some valuable information for understanding these short-term price decisions.

This Focus study proposes a new composite indicator for “price climate”, constructed from questions relating to sales prices in the business tendency surveys and perceptions collected through the household consumer surveys. This “price climate” correlates very well with observed changes in the Consumer Price Index (CPI), significantly improving its forecast relative to standard models. This predictive power is at its maximum at a three-month forecast horizon but quickly disappears for longer time horizons...