• CPI +2.4% vs +2.5% y/y expected
• Prior +2.2%
• HICP +2.8% vs +2.9% y/y expected
• Prior +2.5%

On the month itself, French headline inflation was up 0.1% in May compared to April. That reflects some moderation in energy prices over the past month but that is still much higher than what it was a year ago. For some context, the headline annual inflation rate is now the highest since February 2024.

Looking at the breakdown, food prices held steady at 1.2% while services inflation ticked a little higher to 2.0% (previously 1.8%). The latter continues to be a key sticking point and with higher energy prices set to permeate to other categories, the danger is that it will see a stronger uptick in the months to come.

To add a bit of flavour to the report, energy prices were seen at -8.0% year-on-year in May last year. This year, energy prices are seen at +16.8% year-on-year instead. What a difference twelve months make.

The major worry for the French economy now is that economic growth looks set to soften further in Q2 while price pressures are likely to pick up further going into the summer months later. Stagflation worries will be a key concern and that pose a considerable threat to the ECB’s plans to manage monetary policy this year.

This article was written by Justin Low at investinglive.com.