French Inflation Eases More Than Forecast

(RTTNews) - France's consumer price inflation slowed more than expected in June due to the sharp slowdown in prices of energy, provisional data from the statistical office INSEE showed Tuesday.

The consumer price index posted an annual increase of 1.8 percent in June, following May's 2.4 percent rise. Prices were forecast to grow 2.1 percent.

Similarly, EU harmonized inflation slowed to 2.0 percent from 2.8 percent in the previous month. This was below economists' forecast of 2.4 percent.

The annual growth in energy prices eased to 11.2 percent from 16.6 percent. Services inflation softened to 1.8 percent from 2.1 percent. Food prices posted a slower growth of 0.9 percent.

On a monthly basis, consumer prices fell 0.2 percent, reversing a 0.1 percent gain in May. Likewise, the harmonized index of consumer prices dropped 0.3 percent after a 0.1 percent rise. Both consumer and harmonized prices were expected to remain flat in June.

ING economist Charlotte de Montpellier said inflation data confirmed that the risk of an inflationary spiral remains extremely low in France and significantly more limited than in neighbouring countries.

Inflation is expected to rise again in the coming months but the increase should remain limited, given the current weakness in domestic demand in France, low consumer confidence, and the downward revision of firms' price expectations, the economist noted.

Another report from the statistical office showed that producer price inflation accelerated in May on higher refined petroleum product prices. Prices were up 3.0 percent year-on-year after rising 2.3 percent in April. On a monthly basis, producer prices climbed 0.3 percent, in contrast to the 2.0 percent decline in April.

Household consumption rebounded in May as spending on energy accelerated from April, INSEE said in a separate report. Household spending grew 0.5 percent, offsetting a 0.5 percent fall in April.

Energy consumption advanced 2.3 percent, while food consumption dropped 0.2 percent. Consumption of engineered goods rose only 0.1 percent.