French CPI inflation accelerates in September on higher service prices, slowdown in oil price decline

France’s consumer price index inflation accelerated 0.4 percent year-on-year in September 2016 after rising 0.2 percent in August, according to the preliminary estimate released by the statistical office INSEE. Rise in service prices and just a mild decline in energy prices is expected to have driven the acceleration in the headline inflation print. Services inflation accelerated 1.3 percent year-on-year, whereas energy prices dropped 1.2 percent.

On the contrary, food prices slowed to 0.4 percent, whereas manufactured produces dropped 0.6 percent. They are expected to restrict the sharp increase in inflation.

Over one month, French consumer prices dropped 0.2 percent in September. The downturn is less sharp than in September 2015. The smaller decline probably came from the retreat, less pronounced than in the earlier year, in the prices of certain tourism-related services after the summer school holiday period.

Recovery in petroleum product prices, following two months of decline, should ease the overall decrease. On the other hand, manufactured product prices are expected to increase at a slightly slower rate as compared to September 2015. Moreover, food prices are expected to diminish.

The Harmonised Index of Consumer Prices year-on-year rose 0.5 percent in September as compared with prior month’s 0.4 percent rise. Over the month, it is set to edge down by 0.2 percent.