April 3, 2023
According to data released, inflation in France unexpectedly fell well below 7% in December from a record high a month earlier. This is the most recent indication that Europe is escaping the worst of the inflation problem thanks to slower energy price increases.
After Germany’s inflation fell for the second consecutive month in December and after lower Spanish inflation figures published last week, the French data furthered recent indications of easing price pressures in the euro zone.
Following the release of the new data, French bond yields decreased and European stocks rose on hopes that Europe’s inflation problem may be abating.
According to preliminary figures from the national statistics office INSEE that have been harmonised with EU standards, the inflation rate in France decreased to 6.7% in December. That was lower than the average estimate of 7.2% in a Reuters survey of economists’ expectations and down from the 7.1% in November.
The wholesale gas prices dropped across Europe in recent weeks amid record high temperatures, resulting in the lowest energy price increases since September 2021, rising 15.1% as opposed to 18.4% in November.
According to Bruno Le Maire, the French Finance Minister, the rate of inflation will decline through the year 2023. He has earlier predicted that inflation will rise until the middle of the year before declining.
Given the 15% increase in regulated gas and power prices at the beginning of the year, energy prices are expected to temporarily increase inflation pressures in January.
Nevertheless, according to economist Sylvain Bersinger of consultancy Asteres, “the favorable changes in energy prices suggest there may be light at the end of the tunnel.”
Source: Reuters
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