French consumer prices slip unexpectedly in November

The cost of living in France retreated slightly in November, in a reflection of underlying weakness in the economy.

French consumer prices were flat versus a year ago but rose by 0.2% month-on-month in November, according to INSEE.

That was exactly as expected by economists.

In comparison with the prior month, the largest falls were seen in the prices for fresh foods (-2.0%), energy (-0.5%) and transport and communications (-1.6%).

However, in harmonised terms the consumer price index retreated by 0.2% in comparison to October and was up 0.1% on the year ago level, down from the 0.2% gain registered in October.

Economists had anticipated a flat reading over the month and that the year-on-year rate would remain at 0.2%.

“The renewed fall in France’s headline inflation rate in November highlights the absence of price pressures in the region’s second-largest economy,” Capital Economics’s Jessica Hinds said in a research report sent to clients.

Core harmonised prices were unchanged over the month and up by 0.7% on the year.

The weakness in the economy was underscored by the details of the latest industrial production figures, Hinds added, which were also released on 10 December. .

French industrial output rose at a 3.6% year-on-year clip in November on the back of a jump in energy production, but the core manufacturing component came off by 0.5% over the month.

“We doubt that industry’s recovery will gain much traction in the coming quarters. Overall economic growth is likely to remain very sluggish, and certainly too slow to boost inflation quickly back towards 2%.”

Barclays’s Francois Cabau was of a similar opinion, pointing out to clients that: “today’s release confirms ongoing subdued manufacturing momentum, and alike the September release, the overall industrial output headline was supported by a strong performance on the volatile component front.”