| Consensus | Actual | Previous | |
|---|---|---|---|
| Month over Month | -0.2% | -0.2% | -0.2% |
| Year over Year | 3.4% | 3.5% | 3.4% |
Highlights
French inflation eased dramatically in November, according to final data released on Friday, but the decline was less marked than originally reported.
The consumer price index fell by 0.2 percent last month, in line with the consensus and flash estimates, after an unrevised increase of 0.1 percent in October. But the annual inflation rate declined to 3.5 percent, down from 4.0 percent a month earlier, but a touch higher than the consensus estimate of 3.4 percent as reported earlier in December.
Core inflation retreated to 3.6 percent in November, well below the 4.2 percent rate of October. Food price inflation has retreated more slowly, declining to an annual rate of 7.7 percent (originally reported as up 7.6 percent) from 7.8 percent previously, but policy makers may be cheered by a 0.3 percent monthly decline in service price inflation, bringing the annual rate down to 2.8 percent (above the previously reported 2.7 percent pace) from 3.2 percent in October.
Harmonised prices, which feed into Eurozone data due next week, declined by 0.2 percent in November, slightly less than the initially reported 0.3 percent decline, taking the annual rate to 3.9 percent, above the flash estimate of 3.8 percent.
Despite easing price pressures across the Eurozone, European Central Bank President Christine Lagarde insisted on Thursday that rate setters must not drop their guard in the fight against inflation. The ECB left its main interest rates on hold at the December meeting, but Lagarde stressed that domestic inflation remains sticky, largely due to the strong labor market.
However French pay growth slowed in the third quarter, according to data also released Friday, with the annual increase in wages declining to 4.2 percent from 5.0 percent in the second three months of the year.
Lagarde made it clear that rate setters did not broach the topic of rate cuts when discussing policy, but that hasn't stopped investors from pricing in an easing of policy as early as April of next year.
The data take the French RPI to minus 9 and the RPI-P to 3, meaning the economy is largely performing within market expectations.
The consumer price index fell by 0.2 percent last month, in line with the consensus and flash estimates, after an unrevised increase of 0.1 percent in October. But the annual inflation rate declined to 3.5 percent, down from 4.0 percent a month earlier, but a touch higher than the consensus estimate of 3.4 percent as reported earlier in December.
Core inflation retreated to 3.6 percent in November, well below the 4.2 percent rate of October. Food price inflation has retreated more slowly, declining to an annual rate of 7.7 percent (originally reported as up 7.6 percent) from 7.8 percent previously, but policy makers may be cheered by a 0.3 percent monthly decline in service price inflation, bringing the annual rate down to 2.8 percent (above the previously reported 2.7 percent pace) from 3.2 percent in October.
Harmonised prices, which feed into Eurozone data due next week, declined by 0.2 percent in November, slightly less than the initially reported 0.3 percent decline, taking the annual rate to 3.9 percent, above the flash estimate of 3.8 percent.
Despite easing price pressures across the Eurozone, European Central Bank President Christine Lagarde insisted on Thursday that rate setters must not drop their guard in the fight against inflation. The ECB left its main interest rates on hold at the December meeting, but Lagarde stressed that domestic inflation remains sticky, largely due to the strong labor market.
However French pay growth slowed in the third quarter, according to data also released Friday, with the annual increase in wages declining to 4.2 percent from 5.0 percent in the second three months of the year.
Lagarde made it clear that rate setters did not broach the topic of rate cuts when discussing policy, but that hasn't stopped investors from pricing in an easing of policy as early as April of next year.
The data take the French RPI to minus 9 and the RPI-P to 3, meaning the economy is largely performing within market expectations.
Market Consensus Before Announcement
No revisions are expected leaving a 0.2 percent monthly fall in prices and a 3.4 percent annual inflation rate, down from October's final 4.0 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.
