French Inflation Slows To 3-Year Low; Economy Logs Slower-Than-Estimated Growth

(RTTNews) - French inflation slowed to a three-year low in August due to the sharp slowdown in energy price growth and the economy registered a slower-than-initially estimated growth in the second quarter on weaker contribution from trade and subdued investment, official data revealed Friday.

The consumer price index posted an annual increase of 1.9 percent after rising 2.3 percent in July, provisional data from the statistical office INSEE showed.

This was the weakest growth since August 2021 but came in above economists' forecast of 1.8 percent.

Similarly, the EU harmonized inflation softened to 2.2 percent in August from 2.7 percent in the previous month. Inflation was seen at 2.1 percent.

Monthly CPI inflation more than doubled to a six-month high of 0.6 percent from 0.2 percent in July. The HICP also grew 0.6 percent after a 0.2 percent rise.

Due to the base effect, energy prices grew only 0.5 percent annually after July's 8.5 percent surge. Driven by accommodation and transport services, prices of services climbed at a faster pace of 3.1 percent.

Food prices gained at a steady pace of 0.5 percent, while manufactured products prices slid 0.1 percent.

Producer prices declined for the eighth consecutive month in July, the statistical office reported today. Producer prices in the domestic market fell 5.4 percent annually but slower than the 5.9 percent decrease in June.

Month-on-month, producer prices moved up 0.2 percent, in contrast to the 0.2 percent drop in June.

In a separate communiqué, the INSEE said gross domestic product grew 0.2 percent sequentially, which was weaker than the initial estimate of 0.3 percent. In the first quarter, economic growth was 0.3 percent.

Household consumption edged up 0.1 percent, offsetting the 0.1 percent fall a quarter ago. At the same time, growth in government spending slowed to 0.4 percent from 0.6 percent.

Gross fixed capital formation declined 0.4 percent mainly as a result of a 0.9 percent decrease in construction and 2.7 percent drop in capital goods investment.

Overall, the contribution of final domestic demand excluding inventories to GDP growth was zero this quarter.

Driven by the dynamism of transport equipment shipments, exports climbed 0.4 percent. Imports rose only 0.1 percent. Overall, the contribution of foreign trade to GDP growth was 0.1 point.

Finally, the contribution of inventory changes to GDP growth was zero. Another data showed that household consumption rebounded in July, underpinned by the increases in energy and food consumption.

Household spending gained 0.3 percent on month in July, in contrast to the 0.6 percent decrease in June.

Due to the rise in fuel consumption, particularly gasoline, spending on energy rebounded 0.9 percent. Likewise, household food consumption recovered 0.4 percent due to higher purchases of meat and other food products. At the same time, household consumption of engineered goods was stable.

The statistical office today confirmed that France's payroll employment was flat in the second quarter. This followed an increase of 0.3 percent in the first quarter. Private payroll employment dropped slightly by 0.1 percent, while public payroll employment grew 0.3 percent.