French inflation softens to 1.4% in Feb; Q4 growth confirmed at 0.4%

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Quelle surprise.

France’s inflation rate dipped unexpectedly this month, falling back to 1.4 per cent after hitting its highest level in four years at the start of 2017.

A preliminary reading from Insee this morning said annual inflation had softened from January’s 1.6 per cent this month and came in lower than the 1.7 per cent forecast by economists for February.

Consumer prices have been on the march across Europe on the back of climbing energy prices but today’s figures point to an uneven inflationary performance across the eurozone. By contrast, inflation hit 3.1 per cent in Spain this month.

GDP growth in the eurozone’s second largest economy was also confirmed at a 0.4 per cent pace in the three months to the end of December – its best quarter since the start of last year and matching the rate in Germany in the period.

The economy grew 1.1 per cent in 2016 as a whole, softer than Germany’s 1.9 per cent and the eurozone average of 1.7 per cent last year.

Latest survey data from French businesses and consumers have pointed to solid growth at the start of the year despite the market jitters unleashed by the country’s looming presidential elections in late April and early May.

Insee added that energy prices would begin to “stabilise” this month after five months of rising costs. Economists expect France’s inflation rate to peak in the coming months before falling back to close to 1 per cent over late 2017 and early 2018.

Higher inflation threatens to choke off some of the consumer spending that has been driving the country’s recovery in the last year.

Official figures also showed consumer spending was up 0.6 per cent in January compared to the same month last year.

Read more: France’s economy is defying pre-election jitters

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