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Seasonal Rise in Services Boosted French Inflation

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France’s inflation rate rose 0.2% in December 2015

France is one of the important economies in Europe. Any positive development in France encourages growth in the continent. Most of the European countries are entangled with low inflationary pressure. According to the National Institute of Statistics and Economic Studies, or INSEE, France’s CPI (consumer price index) rose 0.2% month-over-month in December, as compared to a 0.2% decline in November 2015.

Although inflation has increased, it is much below the ECB’s (European Central Bank) target rate of close to 2.0%.

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As a result, the Vanguard FTSE Developed Markets ETF (VEA) and the iShares MSCI France ETF (EWQ) fell 1.5% and 1.9% respectively, on January 13. Among French ADRs (American depositary receipts), Total (TOT), CGG (CGG), Criteo SA (CRTO), and Sanofi SA (SNY) fell by 1.1%, 8.6%, 3.3%, and 2.2%, respectively, on January 13.

French inflation rose 0.2% on an annual basis

On a YoY (year-over-year) basis, French inflation rose 0.2% in December after registering no change in November 2015. The increase in prices was mainly attributed to a seasonal increase in service prices by 0.6% month-over-month and 1.1% YoY. However, this increase was offset by a decrease in energy prices by 1.2% on a month-over-month basis and 4.7% on a YoY basis in December.

France’s harmonized inflation rate stood at 0.2% MoM in December

France’s HICP (harmonized index of consumer prices), which is meant for comparison with the European Union, rose 0.2% month-over-month in December, as compared to a 0.2% decline in November. On a YoY basis, France’s HICP rose 0.3% YoY in December, as compared to a 0.1% increase in November.

France’s near-zero inflation is much below the ECB’s target rate of close to 2.0%. Price growth is a must for the economy to provide an incentive for businesses to grow. However, with the extended stimulus by the ECB, inflation may improve in France.

You may also be interested in reading The Eurozone’s Inflation Remained Unchanged in December.

To remain up-to-date on the economic front, refer to Market Realist’s Global ETF Analysis page.

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