France’s final HICP inflation data for February to be released tomorrow is unlikely to see any change and confirm the flash estimate of -0.1% y/y, as compared with January’s 0.3% y/y. The flash release had stated that in February prices of all the major components weakened on a year-on-year basis, with energy component weakening the most, dropping to -6.8% y/y from -3.8% y/y. Food prices also continued to decline, dropping to 0.1% y/y from 0.4% y/y. Decline in prices of fresh foodstuffs drove the fall in food prices.
Amongst core components, the manufactured products’ prices recovered on a month-on-month basis after the end of winter sales. Nevertheless, the monthly recover was unsuccessful in lifting the annual rate that weakened to -0.2% from -0.1%. Prices paid for services also fell to 0.8% y/y in February from 1.1% y/y in January. Insee’s data had stated that the offset of school holiday calendar should negatively impact the prices of services related to tourism in 2016.
“French HICP inflation is set to average 0.6% in 2016 and 1.6% in 2017. We expect the core metric to be 1.0% in 2016, before rising to 1.3% in 2017”, says Societe Generale.
