Falling inflation in France amplifies signs of slowing prices in Europe

Inflation in France unexpectedly fell well below 7% year-on-year in December after hitting a record high a month earlier, in the latest sign that a slowdown in rising energy prices is helping Europe weather the worst of the inflation crisis. .

The French data released this Wednesday (4) added to the recent evidence of easing price pressures in the euro zone – inflation in Germany fell for the second consecutive month in December and last week lower inflation figures were reported in the Spain.

The inflation rate in France fell to 6.7% in December year-on-year, according to harmonized preliminary data for the European Union presented by the national statistics office INSEE.

The reading represents a drop from a rate of 7.1% in November and was below the expectation of 7.2% in a Reuters poll.

Energy price rises rose 15.1%, the weakest pace since September 2021 and up from 18.4% in November, as wholesale gas prices have fallen across Europe in recent weeks amid warm temperatures. record highs.

French Finance Minister Bruno Le Maire told France Inter Radio that inflation will trend downwards throughout 2023. He had previously said that inflation would remain high until mid-year, before falling again.

In the short term, energy prices are likely to add to inflationary pressures in January, as regulated gas and electricity prices rose 15% earlier in the year.

“However, the favorable movements in energy prices suggest that there may be light at the end of the tunnel,” said economist Sylvain Bersinger, from consultancy Asteres.

While France has kept inflation below most other EU countries thanks to limited increases in regulated gas and energy prices, the impact on consumers’ purchasing power is nevertheless undermining household confidence.

INSEE said in a separate report on Wednesday that its consumer confidence index fell marginally last month to 82 from 83 in November, well below the long-term average of 100.

While INSEE’s monthly survey showed household concerns about unemployment, their finances and rising inflation, the decline in purchasing power is also causing social tensions.