June 29, 2018 / 8:27 AM / 9 months ago

French inflation picks up to near six-year high in June

PARIS (Reuters) - French inflation picked up to a near six-year high in June, lending support to the European Central Bank’s decision to close its bond-buying program but signaling a squeeze for consumers in the euro zone’s second-biggest economy.

FILE PHOTO - A man looks at children's snacks displayed on shelves as he shops at a Carrefour Hypermarket store in Montreuil, near Paris, France, February 5, 2018. REUTERS/Regis Duvignau

Data published by the national INSEE statistics office on Friday showed that EU-harmonised French consumer prices rose 2.4 percent, the highest since August 2012. The higher French inflation figures also came a day after inflation in Germany also surpassed the ECB’s 2 percent target.

With inflation gaining ground in the euro zone, the ECB said earlier this month it would end its crisis-era bond buying program — originally designed to ward off deflation and stimulate the economy. But it signaled that any interest rate rise remains distant.

A breakdown of the French data showed jumps in tobacco and energy prices had contributed the most to the pick up in inflation.

President Emmanuel Macron’s government increased taxes on cigarettes and planned tax hikes on diesel and gasoline kicked in at the start of the year which, combined with rising crude oil prices, has pushed prices at the pump to an all-time high in May.

That has hit French consumers, with their buying power falling by 0.6 percent in the first quarter, according to INSEE data released earlier this month. Data early on Friday also showed that consumer spending had fallen 0.2 percent over the year in May.

The government says lower payroll taxes starting from October and falling unemployment will eventually boost purchasing power.


French EU-harmonized inflation fell to a historical low of -0.8 percent in July 2009 and hit an all-time high of 4.0 percent in July 2008, according to INSEE’s records going back to 1991.



Reporting by Michel Rose; Editing by Sudip Kar-Gupta

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