France Flash CPI (Jan.) - Capital Economics
European Economics

France Flash CPI (Jan.)

European Data Response
Written by Jessica Hinds

The surprisingly big jump in France’s headline inflation rate in January was primarily driven by a surge in manufactured goods inflation as winter sales were postponed by two weeks. This will be reversed in February and does not therefore point to a more sustained rise in underlying inflation.

Delayed winter sales drive up headline inflation

  • The surprisingly big jump in France’s headline inflation rate in January was primarily driven by a surge in manufactured goods inflation as winter sales were postponed by two weeks. This will be reversed in February and does not therefore point to a more sustained rise in underlying inflation.
  • The increase in the headline consumer price inflation rate from 0.0% in December to 0.6% in January was a bit bigger than the consensus forecast of an increase to 0.4%. The harmonised rate rose by even more, from 0.0% to 0.8%.
  • The breakdown of the consumer price index showed that the main cause of January’s jump was a surge in the inflation rate of “manufactured products”, from -0.9% in December to +1.0% in January. (See Table 1 and Chart 1.) The French statistics office attributed this to delayed winter sales, which due to COVID-19 are running from 20th January to 16th February, compared to 8th January and 4th February in 2020.
  • As a result, the prices of clothing and footwear will have been higher this January than last. But this temporary effect will be reversed in February, and by March will have no bearing on the annual inflation rate. January’s jump should not therefore be interpreted as a clear rise in underlying price pressures.
  • Admittedly, the services inflation rate also increased. There was no explanation in the accompanying press release as to what caused this. However, the rise in services inflation was small and, at 0.9%, it is still in line with its average over the past five years. (See Chart 1 again.)
  • Today’s data follow stronger-than-expected January inflation numbers for Germany and Spain last week. These reflected a range of factors (see here) but in light of the French data, it now seems likely that euro-zone HICP inflation will have risen to close to 1.0% in January. (See Chart 2.) But while inflation might be a little higher than we had expected this year, there was nothing in today’s data from France to suggest that inflation might be about to take off.

Chart 1: Goods & Services CPIs (% y/y)

Chart 2: France & Euro-zone Headline HICP (% y/y)

Sources: Refinitiv

Source: Refinitiv

Table 1: French CPI Inflation (% y/y)

CPI

Food

Tobacco

Energy

Goods

Services

HICP

Oct.

0.1

1.5

13.7

-7.8

-0.1

0.4

0.1

Nov.

0.2

2.0

12.5

-7.8

-0.3

0.7

0.2

Dec.

0.0

1.0

12.5

-7.0

-0.9

0.7

0.0

Jan.

0.6

1.0

12.7

-5.9

1.0

0.9

0.8

Source: Refinitiv *y/y rates are working-day adjusted.


Jessica Hinds, Europe Economist, jessica.hinds@capitaleconomics.com