- France September preliminary CPI +3.0% vs +2.8% y/y expected
- Prior +2.4%
- France September preliminary HICP +3.4% vs +3.1% y/y expected
- Prior +2.6%
The breakdownThe pickup in French inflation was fairly broad, although energy remains the standout driver. Energy prices accelerated to +21.2% y/y from +16.7% in August, reflecting higher petroleum-product and gas prices.
Services inflation also picked up to from 1.9% to 2.2% in September, while food inflation rose to from 1.1% to 1.5% on the month. All of this is likely to push up the core inflation estimate, which we will only get with the final report. But for now, the key takeaway is the jump in HICP to from 2.6% to 3.4% in September, above expectations and adding to inflation concerns ahead of Germany’s CPI figures later today.
What does the data measure?CPI measures changes in prices paid by French households for goods and services. HICP is the the other relevant measure, using the harmonised methodology that allows inflation to be compared across euro area countries.
Why does it matter to markets?France is the euro area's second-largest economy, so its inflation reading provides an early signal for the broader euro area inflation picture.
A rise in prices would show inflation moving further above the ECB's 2% target and could reinforce concerns that price pressures are proving more persistent.
How does this fit the broader economic picture?August inflation had already accelerated, with French CPI rising to 2.4% y/y from 2.1%. Energy was the main driver, with energy prices up 16.7% y/y, while underlying inflation remained much softer. Of note, core inflation eased to 1.1% and services inflation slowed to 1.9%.
What is the potential market impact?A result close to expectations may produce a limited reaction, with traders likely to wait for Germany's September CPI later today for a clearer euro area signal.
Current relevance to markets?High. Inflation has returned to the centre of the ECB debate, and an expected French HICP reading above 3% would add another piece of evidence ahead of the broader euro area inflation figures.
This article was written by Justin Low at investinglive.com.