French inflation drops to five-year low

13th October 2006, Comments 0 comments

PARIS, Oct 13, 2006 (AFP) - French 12-month inflation fell to the lowest level for five years in September to just 1.2 percent, official data showed on Friday, in response to lower oil prices that economists say are a boon to domestic consumption.

PARIS, Oct 13, 2006 (AFP) - French 12-month inflation fell to the lowest level for five years in September to just 1.2 percent, official data showed on Friday, in response to lower oil prices that economists say are a boon to domestic consumption.

In August inflation came to 1.9 percent compared with the same month in 2005. On a monthly basis, consumer prices fell 0.2 percent in September from August, the national statistics institute INSEE said Friday.

"The price of a barrel of North Sea oil dropped 15 percent in dollar terms in September," noted analyst Nicholas Bouzou of the financial research firm Asteres.

"As a result, prices of oil products fell 4.3 percent in September and those for energy products, which account for more than 8.0 percent of household consumption, declined 2.6 percent."

He predicted that if current trends are maintained, inflation in France could eventually fall below 1.0 percent, as it did in the late 1990s.

At Natexis Banques Populaires economist Alexandre Bourgeois predicted that after an expected rise of 1.7 percent, consumer price inflation in France should not exceed 1.5 percent in 2007.

Bouzou noted that each time inflation weakens, "there are also gains in household purchasing power," the principal motor of the French economy.

Inflationary pressures have lessened elsewhere in the eurozone as well, notably in Germany, "which makes the current stance of the European Central Bank all the more regrettable", said Alexander Law of the research firm Xerfi.

The bank for the past 10 months has approved regular increases in eurozone interest rates, with its president, Jean-Claude Trichet, arguing that inflationary pressures are weighted to the upside.

The bank holds that annual inflation in the 12-nation eurozone should be held just under two percent. It came to 1.8 percent in September.

Copyright AFP

Subject: French news

 

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