French inflation slowed to a 14-month low, a sign of improvement that was quickly overshadowed by news of stronger underlying pressures in the broader euro area.
(Bloomberg) — French inflation slowed to a 14-month low, a sign of improvement that was quickly overshadowed by news of stronger underlying pressures in the broader euro area.
The measure of annual consumer-price changes in the region’s second-largest economy stood at 5.3% in June after 6% in May, statistics agency Insee said. Economists surveyed by Bloomberg had on average predicted a 5.4% rise.
Italy, Belgium and the Netherlands all showed slowing inflation this month, along with Spain’s more remarkable outcome below the European Central Bank’s 2% target. But German consumer-price gains quickened and an underlying measure for the whole euro area also rose, which is likely to focus officials most of all.
“We have made our future policy decisions conditional on, first, the inflation outlook, second, the dynamics of underlying inflation and third, the strength of policy transmission,” ECB President Christine Lagarde told an annual retreat in Portugal earlier this week. “Barring a material change to the outlook, we will continue to increase rates in July.”
Her colleague, Vice President Luis de Guindos, described such a decision as a “fait accompli,” but said the prospect of a further increase at the subsequent meeting in September is still an open question among officials as they gauge the strength of underlying price pressures.
In its preliminary figures, France doesn’t report so-called core inflation data stripping out volatile elements such as energy. Insee’s publication showed services prices rose 2.9%, slowing for a second month. However, manufactured-goods inflation accelerated to 4.3%.
The rising cost of living in France is already hurting consumers, and the economy is set to record only lackluster growth this year. In a separate release, Insee said household outlays rose 0.5% in May as spending on clothing, food and energy rebounded. That’s slightly below 0.7% increase anticipated in a Bloomberg survey.
–With assistance from Mark Evans and Ainhoa Goyeneche.
(Update with underlying inflation starting in first paragraph)
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