The inflation in France has fallen to its lowest in four years, making the country different from other major European economies. According to flash estimate by French statistics office Insee, consumer price index has dropped to 0.8% in February from 1.7% in January due to a fall in electricity prices, which led the charge. Prices were constant on a monthly basis, and the EU-harmonized index was 0.9%.
The rate of inflation has fallen very quickly, and this has led to the expected reduction in the deposit rate by the ECB by 25 basis points to 2.5% next week. The reason behind the decline, according to Sylvain Bersinger, chief economist at Asterès, is that electricity prices fell 15% on February 1, benefiting more than 24 million subscribers. Energy inflation in France stood at -5.7% year on year.
Despite the general trend of a fall in prices, food prices increased slightly while the prices of services, manufactured products and tobacco decreased. However, he notes that inflation is likely to rise slightly in the spring of 2025 and remains below the 2% level. He expects that the production costs will increase slowly, especially in the industrial and agricultural sectors.
Unlike France, other European countries had an increase in inflation. Inflation rose to 2.9% in Spain and remained at 2.8% in Germany for the third straight month. Italy’s inflation rate rose to 1.7%, the highest since September 2023. However, the French economy also slowed down.
GDP declined by 0.1% in the last quarter of 2024, thus recording a negative growth after recording 0.4% growth in the previous quarter which had been boosted by the Paris Olympic and Paralympic Games. Consumption of household goods and construction investment also decreased, which contributed to the negative growth. French GDP increased by 1.1% in 2024, the same rate as in 2023.
