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French Inflation Rose: Will It Impact the ECB’s Stimulus Decision?


Jul. 14 2016, Published 9:30 a.m. ET

French inflation rose by 0.2%

Consumer prices in France increased by 0.2% on an annual basis in June—compared to unchanged inflation in the previous month and slightly below estimated forecasts of a 0.3% rise. Inflation increased at the highest rate since January, primarily driven by an increase in food prices. It was partially offset by a decline in global oil prices and manufactured products. On a monthly basis, French inflation rose by 0.1% in June—in line with expectations and compared to 0.4% in the previous month. On Tuesday, Germany’s inflation levels rose by 0.3%. Higher inflation levels in the two major economies in the Eurozone are expected to weaken expectations of stimulus measures being introduced by ECB (European Central Bank) chief Mario Draghi in the upcoming monetary policy. The iShares MSCI France ETF (EWQ) was trading higher by 0.61% at 2:30 PM EST on July 13, while the iShares MSCI Germany ETF (EWG) rose by 0.37%.

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Industrial production remains low in the Eurozone

Industrial production in the Eurozone increased by 0.5% on an annual basis in May—compared to a 2.2% increase in April and expectations of a rise of 1.4%. On a monthly basis, industrial production in the Eurozone contracted by 1.2% in May—compared to a 1.4% rise in the previous month. Even though inflation levels have been rising at a steady pace in Germany and France, lower industrial production could be a concern for the ECB while deciding fresh stimulus measures. The iShares MSCI Eurozone ETF (EZU) was trading higher by 0.38% at 2:30 PM EST on July 13.

Spanish and Italian economies exhibit negative price growth

Inflation rates in Spain declined in June on an annual basis by 0.8%—compared to a 1.0% drop in the previous month. Even though the contraction was the lowest in three months, inflation rates in Spain haven’t shown positive growth in almost a year. Consumer prices exhibited a downtrend in Italy as well. They fell by 0.4% in June on an annual basis—compared to a 0.3% drop in the previous month. The contraction in prices marks the fifth straight month of negative growth in inflation rates—driven by a fall in housing and transport prices. The iShares MSCI Spain Capped ETF (EWP) was trading higher by 0.20% at 2:30 PM EST on July 13, while the iShares MSCI Italy Capped ETF (EWI) reduced by 0.55%.


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