France's HICP inflation printed at 0.0% yoy in March, up from -0.3% yoy in February while the national CPI fell by -0.1% yoy. The main surprise came from energy prices. Whereas gasoline prices rose by 3.0% last month, the INSEE reported that energy prices only increased by 1.0% mom, pushing the annual rate up from -5.3% yoy to -3.7% yoy in March (adding 13bp to the headline yoy figure).
Food price inflation remained unchanged at a tepid growth rate of 0.1% yoy. The fresh food price inflation inched up to 5.1% yoy from 3.9% yoy, mainly because of less favourable weather conditions than last year. As expected, the bulk of the increase in the annual headline inflation rate came frommanufactured products, up 2.0% mom, pushing the annual rate up from -1.7% yoy to -1.0% yoy (adding 18bp to the headline annual rate).
This monthly rise was higher than usual (1.1%) owing to the introduction of an additional week of winter sales in February. In contrast, downside pressures stemmed from prices paid for services, slowing from 1.3% yoy to 1.1% yoy in March (cutting 9bp from the headline). The INSEE measure of core inflation (which differs from core HICP) slowed once again from 0.1% yoy to 0.0% yoy in March.
The core measure of French HICP rose from 0.3% yoy to 0.4% yoy. For the April reading, Societe Generale expects the trend to continue on the upside, with energy prices being the main driver. On 1 April, there was a hike in the natural gas tariffs, up 0.58%, and this, together with the ongoing rebound in gasoline prices, should provide upside pressure for the energy component.
Food prices are expected to rise tepidly while fresh food prices should continue their upward march. Fresh fruit prices should remain broadly stable but fresh vegetable prices should provide some upward pressure as significant cuts in planted areas reduced supply. Improving consumer confidence should have positive effects on goods prices while the Easter holiday should also see services prices, and specifically, prices paid for transport services, increase.
"French HICP inflation to average 0.7% in 2015 and 1.6% in 2016, while the core metric should remain stable at 0.9% in 2015 and 1.1% in 2016", estimates Societe Generale.
