The latest report on French industrial producer prices in February 2025 showed that prices in the home market decreased by 0.8 percent, declining across sectors. Notably, mining and quarrying products, energy and water declined by 2.9 percent, driven by the fall in electricity prices (minus 7.0 percent). This was due to the annual revision of regulated electricity sales tariffs starting February 1st. This coincides with the broader trend of declining producer prices, marking the fifteenth consecutive month of annual decline (minus 1.4 percent).

Food and beverage prices saw another month uptick (0.5 percent), particularly in processed and preserved meat, suggesting potential inflationary pressures in consumer goods. Similarly, other industrial products saw an upward shift (0.3 percent), spurred by a sharp rise in prices of metal structures and parts of structures (2.8 percent). Perfumes and toilet preparations (2.8 percent) also grew.

In contrast, electronic equipment and machinery stabilised while transport equipment prices nearly stabilised (minus 0.1 percent) on the month. Import prices for industrial goods slowed (0.2 percent), reflecting declining costs across refined petroleum (minus 0.7 percent), electronic equipment and machinery (minus 0.2 percent), and communication equipment (minus 0.9 percent).

Overall, decline in short-term price suggest decreased cost pressures. Long-term deflationary trends in producer prices indicate ongoing market adjustments and economic rebalancing.

The producer price indices (PPI) measure transaction prices, exclusive of VAT, for goods from industrial activities sold on the French market. Construction is excluded. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer and, in contrast to the consumer price index (CPI), excludes VAT and other deductible taxed associated with turnover.

The PPI measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI).

Because the index of producer prices measures price changes at an early stage in the economic process, it can serve as an indicator of future inflation trends. The producer price index and its sub-indexes are often used in business contracts for the adjustment of recurring payments. They also are used to deflate other values of economic statistics like the production index. It should be noted that the PPI excludes construction.

The PPI provides a key measure of inflation alongside the consumer price indexes and GDP deflators. The output price indexes measure change in manufacturer' goods prices produced and often are referred to as factory gate prices. Input prices are not limited to just those materials used in the final product, but also include what is required by the company in its normal day-to-day operations.

The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.

The bond market rallies when the PPI decreases or posts only small increases, but bond prices fall when the PPI posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.