French Inflation Slows Sharply in September, Driven by Lower Energy Costs

French inflation eased significantly in September, falling below economists’ expectations as a sharp decline in energy prices, particularly petroleum products, helped curb price pressures.

Preliminary data released by the National Institute of Statistics and Economic Studies (INSEE) on Friday revealed that France’s harmonized inflation rate, which is adjusted for comparison with other Eurozone countries, increased by 1.5% year-on-year in September. This marks a significant slowdown from the 2.2% rise recorded in August and falls short of the 2.0% increase anticipated by economists.

The decline in energy prices was the primary driver of the slowdown in inflation. Service prices also rose at a slower pace, increasing by 2.5% year-on-year compared to 3.0% in August, while prices for manufactured goods continued their downward trend.

Food and tobacco prices remained relatively stable, increasing at the same rate as in August.

On a monthly basis, consumer prices fell sharply, registering their steepest decline since 1990. INSEE attributed this drop to lower energy prices, seasonal reductions in transport and accommodation costs, the normalization of prices following the Paris Olympics, and lower healthcare prices.

France’s consumer price index (CPI), a separate measure of inflation, also eased, rising by 1.2% year-on-year in September, down from 1.8% in August.

Key Takeaways:

• French inflation slowed sharply in September, falling below economists’ expectations.
• The slowdown was driven primarily by a decline in energy prices, particularly petroleum products.
• Service price inflation also eased, while food and tobacco prices remained relatively stable.
• The monthly decline in consumer prices was the largest since 1990.

The significant slowdown in French inflation is likely to influence the European Central Bank’s (ECB) upcoming interest rate decisions. With inflation easing faster than anticipated in several Eurozone countries, the ECB may face increasing pressure to cut interest rates to support the bloc’s weakening economy.