Inflation fell again in April in France, increasingly close to the ECB’s objective

Inflation fell again in April in France, increasingly close to the ECB’s objective
Inflation fell again in April in France, increasingly close to the ECB’s objective

The general price increase fell again in April. Inflation stood at +2.2% over one year, compared to +2.3% in March, according to final figures published by INSEE this Wednesday, confirming a first estimate dating from the end of April.

The decline “results from the slowdown over one year in the prices of food (+1.2% after +1.7%) and tobacco (+9.0% after +10.7%)”, specifies the institute in a press release. The prices of manufactured products even fell slightly, by 0.1% after +0.1% in March. The prices of services, which represent almost half of consumption, increased over one year at the same rate as in March, +3%. Rebound also in energy prices (+3.8% after +3.4%).

For Charlotte de Montpellier, economist at ING, “This data shows, once again, that disinflation is a slow process, especially at the end of the road back to 2%”the objective set by the European Central Bank (ECB), she explained when publishing the provisional data.

However, she judged “encouraging” the evolution of food prices and that of manufactured products, which should “continue to endure disinflation in the coming months”. On the contrary, energy inflation “is expected to increase significantly over the coming months, due to less favorable base effects and the rise in petroleum product prices.” It forecasts inflation in services remaining close to 3% in the coming months. In total, overall inflation “could increase again in the coming months and return above 2.5%”, according to her, while underlying inflation (which excludes the most volatile prices) could “decrease slightly and stabilize close to 2%”.

France: clear slowdown in inflation in March, to 2.3%

Inflation picks up over one month

Over one month, however, inflation accelerates to 0.5% (compared to 0.2% in March), indicates INSEE, again confirming its first estimate. This development is notably due to the increase in prices of services (+1%, after stability in March). Conversely, “the prices of manufactured products and tobacco are stable” over a month.

Over one year, the harmonized consumer price index (HICP, which allows comparisons with other EU countries and is of particular interest to the European Central Bank for its monetary policy) increases by 2.4% in April 2024, as in March, and 0.6% over the month, after +0.2% in March. These figures are also in line with initial estimates.

Growth should continue, but…

This decline in inflation should be compared with the growth figures. France’s gross domestic product (GDP) increased by +0.2% in the first quarter and is on track to continue this momentum in the second. He “would still be driven by market services, thanks in particular to commerce, business services and information-communication”, according to the Banque de France, which spoke on this subject on Tuesday.

The monetary institution however warned that, if the activity was ” very strong ” last month, its forecast for the April-June period was “surrounded by greater uncertainty than usual” due to public holidays and bridges in May. And a change in the basis used by INSEE for its national accounts, which will be implemented on May 31, could also affect the calculation of quarterly growth.

The French economy should still grow “slightly” in the second quarter (Banque de France)

Rates falling more and more likely

The fact remains that this context, combining increased growth and lower inflation, could lead BCE to lower its rates as of June 6, according to the governor of the Bank of France, François Villeroy de Galhau. During its last meeting in April, the European monetary institution indeed judged “plausible” to start lowering its key rates – currently at their highest – in June if the data confirms by then the anticipated return of inflation in the euro zone to the 2% target.

If France is on the right track, it is not the only country. Inflation also stood at +2.2% year-on-year in April in Germany, according to final figures from the German Destatis institute published on Tuesday. It is even lower in Italy: +0.9% over one year (provisional figure). In Spain, on the other hand, it accelerated to stand at +3.3% over one year (also a provisional figure).

However, caution is required. The director of the International Monetary Fund (IMF) Kristalina Georgieva recalled on Tuesday that “Inflation is falling but it is not eliminated”.

(With AFP)

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