February 19, 2015

In January, consumer prices plunged 1.0% over the previous month, which contrasted the mild 0.1% increase observed in December. The reading, which represented a multi-year low, was well below the 0.1% decrease the markets had expected. According to the National Statistics Institute (INSEE), the monthly drop reflected lower energy prices, due to lower oil prices, as well as a sharp decline in prices for clothing and footwear as a result of the winter sales.



As a result of the monthly decline, consumer prices fell 0.4% over the same month last year in January (December: +0.1% year-on-year), marking the first negative reading in five years. Consumer prices’ last fall on an annual basis in France was registered in October 2009, when prices fell 0.2%. Meanwhile, core consumer prices—which do not consider volatile categories such as fresh food and energy prices nor regulated prices—were unchanged in January over the previous month and followed a similar flat print in December. Annual core inflation swung from minus 0.1% in December to 0.2% in January.



Harmonized consumer prices (based on the harmonized index of consumer prices, HICP) dropped 1.1% over the previous month (December: 0.1% month-on-month), which drove harmonized consumer prices to fall 0.4% annually in January as well. Annual average HICP inflation inched down from 0.6% in December to 0.5% in January.

The government expects inflation to average 0.9% in 2015. FocusEconomics Consensus Forecast panelists expect HICP inflation to average 0.9% in 2015, which is unchanged from last month’s forecast. For 2016, panelists project that inflation will accelerate to 1.3%.