French Inflation Bounces Back, Household Spending Rises On Higher Energy Bills

Reflecting acceleration in food and services prices, France consumer price inflation bounced back to a three-month high in February and consumer spending rebounded due to the scaling back of state support for energy bills, separate releases from the statistical office INSEE revealed Tuesday.

Despite the energy crisis, the statistical office also confirmed that the French economy avoided a contraction at the end of 2022, underpinned by the positive contribution from foreign trade.

Consumer prices rose at a faster pace of 6.2 percent annually in February after a 6.0 percent gain in the previous month, the provisional estimate from the statistical office showed Tuesday. Prices were forecast to climb 6.1 percent.

Food prices registered a double-digit annual growth of 14.5 percent. Energy prices also grew about 14.0 percent, but this was slower than January’s 16.3 percent increase.

Services prices moved up 2.9 percent and manufactured product prices increased 4.6 percent.

On a monthly basis, consumer prices advanced 0.9 percent, following January’s 0.4 percent increase and exceeded economists’ forecast of 0.7 percent. This was the strongest rate since last October.

EU harmonized inflation increased to 7.2 percent, while the rate was forecast to remain unchanged at 7.0 percent.

At the same time, the harmonized index of consumer prices, or HICP, posted a monthly growth of 1.0 percent, in line with expectations, but faster than the 0.4 percent rise in the previous month.

Pipeline inflation also remained strong in France despite a moderate slowdown, the statistical office said in a separate report on Tuesday.

Producer price inflation in the home market eased to 17.9 percent from 20.5 percent in December. Nonetheless, these prices were approximately 46 percent above their 2019 average level. Month-on-month, inflation more than doubled to 2.7 percent from 1.2 percent.

In the fourth quarter, the second largest euro area economy grew 0.1 percent, as initially estimated, after expanding 0.2 percent in the preceding period, revised data from the statistical office reported.

Household spending was down 1.2 percent on quarter, pulled down by goods consumption and growth in gross fixed capital formation eased sharply to 0.3 percent. Consequently, final domestic demand contributed negatively, by -0.4 percentage points to GDP growth.

As a result of lower energy imports, overall imports slid 0.4 percent. Meanwhile, exports gained 0.5 percent, contributing a positive 0.3 percentage points to GDP growth.

Finally, the contribution of inventory changes to GDP growth was positive this quarter, +0.2 percentage points.

Separate report from INSEE showed that household consumption rebounded in January, driven by a surge in spending on energy after the decrease in state support for the payment of household energy bills.

Household consumption grew 1.5 percent on a monthly basis in January, offsetting the 1.6 percent decline in December.

Energy consumption advanced 4.0 percent. Spending on manufactured goods gained 1.3 percent and food products consumption grew 0.6 percent.

The risk of a recession this winter is receding, ING economist Charlotte de Montpellier said. Nevertheless, the economist sees many risks to the French economy for the rest of the year.

The inflationary peak has not yet been reached in France, so the shock to purchasing power is not over, the economist noted.

The International Monetary Fund forecast France GDP to grow 0.7 percent this year and 1.6 percent next year.

The EU has also provided a similar outlook for France. Economic growth is projected at 0.6 percent in 2023 and 1.4 percent in 2024.

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