France Inflation Lowest In 4 Years On Energy Prices

(RTTNews) - French inflation sunk to the lowest in four years in February due to a notable fall in electricity prices and the economy contracted for the first time since early 2023, official data showed Friday.

Consumer price inflation was 0.8 percent in February compared to 1.7 percent in January, the statistical office INSEE said. This was the weakest since February 2021 and was also below forecast of 1.0 percent.

Likewise, EU harmonized inflation halved to 0.9 percent from 1.8 percent in January. Inflation was seen at 1.2 percent.

Within the overall price index, energy prices plunged 5.7 percent annually, reversing a 2.7 percent gain. Meanwhile, food prices increased at a faster pace of 0.3 percent.

Services inflation softened to 2.1 percent from 2.5 percent and manufactured product prices remained flat.

Month-on-month, the consumer price index remained flat after rising 0.2 percent each in January and December. At the same time, the harmonized index of consumer prices showed nil growth after a 0.2 percent fall.

Capital Economics economist Franziska Palmas said data would support those on the European Central Bank's Governing Council arguing for further rate cuts even beyond next week's meeting.

Further, the statistical office confirmed that the second largest euro area economy contracted in the fourth quarter of 2024.

Gross domestic product shrank 0.1 percent sequentially after expanding 0.4 percent in the third quarter. This was the first quarterly fall since the March quarter of 2023.

The office said the contraction was partly due to the backlash of the Paris Olympic and Paralympic Games which fueled the economic growth in the previous quarter.

In the fourth quarter, payroll employment fell 0.3 percent, after a 0.1 percent rise in the previous quarter, the INSEE reported. Private payroll employment was down 0.3 percent and public payroll employment dropped 0.4 percent.

Another data from the statistical office showed that consumer spending declined in January due to the fall in engineered goods consumption. Household consumption fell 0.5 percent month-on-month in January, in contrast to the 0.7 percent rise in December.

Food consumption rebounded 1.4 percent and energy consumption climbed 0.2 percent. These gains were offset by the 2.4 percent decline in purchases of engineered goods.