French economy staves off inflationary pressure

13th January 2006, Comments 0 comments

PARIS, Jan 13, 2006 (AFP) - Consumer prices in France rose by 1.5 percent over 2005, the French statistics institute INSEE reported Friday, a modest figure after a surge in the price of crude oil during the year, analysts said.

PARIS, Jan 13, 2006 (AFP) - Consumer prices in France rose by 1.5 percent over 2005, the French statistics institute INSEE reported Friday, a modest figure after a surge in the price of crude oil during the year, analysts said.

"The data from INSEE for the month of December basically confirm that inflationary pressures are extremely limited in France," said an analyst at Natexis Banques Populaires, Alexandre Bourgeois.

Month-on-month data from INSEE showed that consumer prices in December had increased by 0.1 percent compared with the previous month of November.

French Finance Minister Thierry Breton, speaking on France Inter radio, called the inflation figures "quite reasonable".

Analysts had been expecting inflation in 2005 to measure 1.6 percent, with consumer prices expected to rise 0.2 percent in December from November.

"The big surprise has been that the increase in the price of oil has not been passed on to other sectors of the economy, above all to the manufacturing sector," said an analyst at HSBC, Nicolas Claquin.

The price of a barrel of London-traded Brent crude oil increased by 49 percent over 2005.

This led to soaring energy costs for industry and consumers, but the surge did not result in significant increases in product prices.

Analysts attribute much of the trend to increased competition among companies, improved efficiency and lower energy dependency.

Increased central bank credibility and more moderate wage demands from workers are also important factors.

European Central Bank head Jean-Claude Trichet said on Thursday that the 12-nation eurozone, which includes France, still faced inflationary dangers, suggesting to traders that the bank might approve another increase in interest rates following its December 1 decision to tighten eurozone monetary policy.

Elsewhere in the eurozone, Spanish inflation came to 3.7 percent last year and 0.2 percent in December from November, according to the national statistics agency INE.

Copyright AFP

Subject: French news

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