France Inflation Softens To 13-Month Low, Q1 GDP Recovers As Estimated
The French consumer price inflation moderated more than expected
to hit a 13-month low in May on food and energy prices, data
released by the statistical office INSEE revealed Wednesday.
The statistical office also confirmed that the second-largest
economy recovered as previously estimated in the first quarter
despite the weak domestic demand.
However, slowing inflation and weak household consumption
suggested that the rebound is unlikely to last long.
Consumer prices grew 5.1 percent from a year ago, following a
5.9 percent rise in April, the provisional estimate showed.
The May CPI inflation rate was the lowest since April 2022, when
prices advanced 4.8 percent. Moreover, the figure was well below
economists' forecast of 5.7 percent.
Data revealed that the deceleration resulted from a slowdown in
prices of energy, food, manufactured goods and services.
On a monthly basis, consumer prices dropped 0.1 percent, in
contrast to April's 0.6 percent increase. Economists had forecast
prices to grow 0.3 percent.
The harmonized index of consumer prices also logged a slower
annual growth of 6.0 percent in May after increasing 6.9 percent in
April. Economists had forecast inflation to slow to 6.4
Month-on-month, the HICP slid 0.1 percent, reversing a 0.7
percent rise in the previous month, while the index was expected to
rise 0.3 percent. Final inflation data is due on June 15.
The larger-than-expected fall in headline inflation in France
and the fall in both services and core goods inflation bode well
for Eurozone HICP inflation to be published tomorrow, and will
strengthen the hand of the doves at the European Central Bank who
argue that the tightening cycle is now nearly over, Capital
Economics' economist Andrew Kenningham said.
The European Central Bank had raised its benchmark rates by a
quarter-point early this month and ECB President Christine Lagarde
has signaled more rate hikes ahead. Nonetheless, the bank slowed
the pace of policy tightening from a half-a-point hike in
A separate release from INSEE on Wednesday showed that domestic
producer price inflation softened to 7.0 percent in April from 12.8
percent in March.
Compared to the previous month, producer prices in the domestic
market fell 5.1 percent, reversing March's 1.9 percent
As initially estimated, gross domestic product grew 0.2 percent
sequentially after stagnating in the preceding quarter, the Insee
On the expenditure-side of GDP, household spending gained only
0.1 percent. The 2.7 percent fall in food consumption was offset by
the 5.7 percent increase in energy consumption. At the same time,
government spending declined 0.4 percent.
Gross fixed capital formation slid 0.8 percent due to the
decrease in construction investment.
Imports shrunk 2.8 percent, while exports logged a moderate drop
of 0.2 percent. As a result, the foreign trade contributed 1.0
point to GDP growth.
Finally, the contribution of inventory changes to GDP growth was
negative in the first quarter.
In April, household spending diminished 1.0 percent from March,
when the volume was down 0.8 percent, the statistical office said
in a separate report. The fall was explained by the downturn on
energy consumption and the further decrease in food spending.
Although France escaped recession last winter, data today
suggested that a recession in the coming months cannot be ruled
out, ING economist Charlotte de Montpellier said.
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