| Consensus | Actual | Previous | |
|---|---|---|---|
| Month over Month | 0.0% | -0.2% | 0.1% |
| Year over Year | 3.7% | 3.4% | 4.0% |
Highlights
French inflation fell sharply in November, the latest eurozone country to record a more dramatic easing of price pressures this month, according to flash data.
Consumer prices slipped by 0.2 percent, well below the consensus estimate of no change, after a 0.1 percent rise in October. That takes the annual rate of inflation down to 3.4 percent, much lower than the 4.0 percent pace recorded in October and the median forecast of 3.7 percent.
While food price inflation remains elevated, rising by an annual rate of 7.6 percent, down only slightly from 7.8 percent in October, central bank officials will welcome a marked reduction in previously sticky service price inflation, which declined to an annual rate of 2.7 percent this month from 3.2 percent previously.
Harmonised inflation, which feeds into eurozone data due later Thursday, declined by 0.3 percent in November after a 0.2 percent decline previously, with the annual rate falling to 3.8 percent from 4.5 percent in October.
The latest data will make for welcome reading for rate setters at the European Central Bank, particularly after price pressures retreated more quickly than expected in other eurozone countries; German inflation released on Wednesday -- fell to 2.3 percent in November, tantalisingly close to the Bank's 2.0 percent target.
Ebbing inflation may also strengthen the market view that eurozone rates could begin to decline next year, with some analysts looking for as many as four rate cuts in 2024. Weak growth figures French gross domestic product declined by 0.1 percent in the third quarter, a downward revision from the initial forecast will only reinforce that narrative.
That's despite continued hawkish comments from European rate setters. Earlier this week, Bundesbank President Joachim Nagel insisted that it's too early to begin envisioning a lower rate environment. The Bank's governing council left the door open to further rate hikes at their October rate-setting meeting, according to minutes released last week.
The data take the French RPI to minus 25 and the RPI-P to minus 13, meaning the economy is underperforming market expectations.
Consumer prices slipped by 0.2 percent, well below the consensus estimate of no change, after a 0.1 percent rise in October. That takes the annual rate of inflation down to 3.4 percent, much lower than the 4.0 percent pace recorded in October and the median forecast of 3.7 percent.
While food price inflation remains elevated, rising by an annual rate of 7.6 percent, down only slightly from 7.8 percent in October, central bank officials will welcome a marked reduction in previously sticky service price inflation, which declined to an annual rate of 2.7 percent this month from 3.2 percent previously.
Harmonised inflation, which feeds into eurozone data due later Thursday, declined by 0.3 percent in November after a 0.2 percent decline previously, with the annual rate falling to 3.8 percent from 4.5 percent in October.
The latest data will make for welcome reading for rate setters at the European Central Bank, particularly after price pressures retreated more quickly than expected in other eurozone countries; German inflation released on Wednesday -- fell to 2.3 percent in November, tantalisingly close to the Bank's 2.0 percent target.
Ebbing inflation may also strengthen the market view that eurozone rates could begin to decline next year, with some analysts looking for as many as four rate cuts in 2024. Weak growth figures French gross domestic product declined by 0.1 percent in the third quarter, a downward revision from the initial forecast will only reinforce that narrative.
That's despite continued hawkish comments from European rate setters. Earlier this week, Bundesbank President Joachim Nagel insisted that it's too early to begin envisioning a lower rate environment. The Bank's governing council left the door open to further rate hikes at their October rate-setting meeting, according to minutes released last week.
The data take the French RPI to minus 25 and the RPI-P to minus 13, meaning the economy is underperforming market expectations.
Market Consensus Before Announcement
Prices are expected to be flat on the month, trimming the annual inflation rate from October's final 4.0 percent to 3.7 percent.
Definition
The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI represent the main rates of inflation. The national CPI is released alongside the HICP, Eurostat's harmonized measure of consumer prices. A flash estimate was released for the first time in January 2016 and is now published towards the end of each reference month.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, France's interest rates are set by the European Central Bank.
France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
France like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). The HICP is calculated to give a comparable inflation measure for the EMU. Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
