French inflation to continue to climb for fifth consecutive month

French HICP inflation is expected to rise to 0.4% yoy in June, up from 0.3% yoy in May. For the month of June, energy prices are expected to have contributed the most, followed by higher food prices. The ongoing rebound in gasoline prices could continue to provide upside push to the energy component. Apart from energy, after the seasonal increase in prices paid for food and tourism related services in May, food prices are expected to provide a muted push and services to remain stable in June. Prices paid for goods which have shown improvement in the last three months are expected to remain stable.

In May, both HICP and national CPI rose by 0.3% yoy, respectively. In the headline, the energy component recorded the biggest movement, rising from -3.4% yoy in April to -2.4%, adding 8bp to the headline number. Food registered tepid growth, increasing from 0.3% yoy to 0.4% yoy (contribution of 2bp) as fresh food remained stagnant, adding 0bp to the headline. Within core components, like other euro area countries, services rose from 1.2% yoy to 1.3% yoy, adding 5bp, led by a seasonal increase in transport and communication service prices. Prices paid for manufactured goods increased slightly from -0.9% yoy to -0.7% yoy in May, adding 5bp. The gain in prices paid for clothes and other manufactured products was offset by a drop in prices paid for medical products. 

"We expect French HICP inflation to average 0.4% in 2015 and 1.4% in 2016, while the core metric should average 0.7% in 2015 and 1.1% in 2016," says Societe Generale.