Key Points
- France’s inflation rose to 1.7% in November, falling short of the expected 1.8% and staying below the ECB’s 2% target.
- The subdued inflation supports the case for further ECB interest rate reductions, with a fourth cut likely in December.
- French consumer spending dropped by 0.4% in October, reflecting weakened demand for manufactured goods and energy.
- Inflation varied across the eurozone, with Spain seeing an uptick while Germany’s rate remained steady.
France’s inflation rate rose to 1.7% in November 2024, marking a slight acceleration from previous months but falling short of analysts’ expectations, according to data released by the statistics agency Insee on Friday. The figure remains well below the European Central Bank’s (ECB) target of 2%, reinforcing arguments for further interest rate reductions in the eurozone.
Economists surveyed by Bloomberg had anticipated inflation rising to 1.8% this month, marking the second consecutive month of acceleration. Despite the uptick, the rate still signals subdued inflationary pressures in the eurozone’s second-largest economy.
The ECB is expected to announce its fourth interest rate cut of the year during its final monetary policy meeting in December. While some officials have hinted at a more aggressive half-point cut due to weaker economic data, most prefer a gradual approach to monetary easing.
Inflation trends across the eurozone remain mixed. Spain recorded an expected rise, while Germany’s inflation rate remained steady, contrary to predictions of an increase. The eurozone’s aggregate inflation rate, set to be released later on Friday, is projected to reach 2.3%, slightly above the ECB’s target.
In France, November’s inflation was driven by a 2.5% increase in services prices, which are closely monitored for signs of economic activity. Energy costs continued to decline but at a slower pace, reflecting the challenges in balancing inflationary pressures and economic growth.
Adding to economic concerns, consumer spending in France fell by 0.4% in October, the first decline since June. Households spent less on manufactured goods and energy, defying economists’ expectations of no change. The drop in spending underscores weakening consumer sentiment, which fell to its lowest level since June amidst ongoing political uncertainty.
France’s political landscape remains volatile, with budgetary disputes triggering selloffs in financial markets. On Thursday, the yield on 10-year French bonds matched Greece’s for the first time, highlighting investor concerns. Despite these challenges, France’s economy grew by 0.4% in the third quarter of 2024, according to Insee, providing a silver lining amidst broader economic and political difficulties.
