French Inflation Falls Below 2% as GDP Growth Slows to 0.2%
France's inflation rate decreased to 1.90% in August from 2.30% in July, exceeding the estimated 1.8%. This decline is attributed to a significant slowdown in energy prices, including a drop in electricity and petroleum product costs. However, prices for services, particularly in accommodation and transport, along with food, manufactured products, and tobacco, saw increases.
The country's GDP grew by 0.20% in the second quarter of 2024, falling short of the 0.3% consensus. Official data from INSEE also indicated that French exports increased by 0.4%, while imports saw a slight rise, driven by energy, water, waste, and agri-food products. Foreign trade played a substantial role in GDP growth in the first quarter. The consumer price index (CPI) for August rose by 0.60% over the previous month and increased by 1.9% year-over-year, compared to 2.3% in July.
The European Central Bank is expected to adjust its policies in response to the inflation trends, as similar decreases have been observed in other major eurozone economies like Germany and Spain. The broader eurozone CPI fell from 2.6% to 2.2% year-over-year in August, with core inflation excluding energy, food, alcohol, and tobacco also showing a decline. The ECB is anticipated to consider these developments while remaining cautious about underlying trends, particularly in the services sector.
