Saturday, February 27, 2016

Inflation turned negative again in February –


Yann Le Guernigou and Myriam Rivet

PARIS (Reuters) – Inflation turned negative again for the first time in a year in February in France under the impact of low energy prices, a development that increases the pressure on the European Central Bank (ECB) when it is preparing new measures to counter deflation risks.

But growth of the economy in the last quarter 2015 was revised upwards to 0.3% and INSEE published at the same time Friday household consumption figures bode well for the first few months of 2016.

the institute reported a first inflation estimate over-year to -0.2% in February, while she was back into positive territory since April 2015 after a winter in the red.

the harmonized price index HICP, which allows comparisons with other countries in the eurozone, fits well down 0.1% year over year while it was expected to rise 0.1% by economists polled by Reuters.

the INSEE relies primarily falling energy prices (-6.8% yoy) linked to oil prices to explain this decline.

But it also mentions the effect of shifting the timing of school holidays in Zone C (the Paris area), which “would weigh on prices of tourism services this year” in February.

the result is a slowdown (+ 0.8%, its lowest level since April 2013) the annual change in prices of services.

“We remain in a zone inflation uncomfortably low, “said Helen Baudchon, economist at BNP Paribas,” these figures are not likely to calm concerns that may have on the dynamics of prices “.

Spain made Friday state morning of a twelve-month inflation down 0.9% in February and several German Lander have also published price indices declined.


These changes complicate the task of the ECB is concerned about the “second round effects” of depressed oil prices and fueling speculation about a strengthening of its program of asset purchases at its meeting March 10, its target of a return to inflation close to 2% remaining very far.

Meanwhile, INSEE revised upward by 0.1 percentage points to 0.3%, the gross domestic product of France in the last quarter of 2015. the average for the year remains at 1.1%, the highest since 2011, after 0.2% in 2014.

the revision takes mainly to household consumption, slightly less low end of the year as announced initially (-0.2% after -0.4%).

Investment, the main driver of growth in the quarter was little changed (+ 0.7% against + 0.8%). It was confirmed at + 1.3% for companies but revised sharply lower for households (-1.0% against + 0.5%) despite the expected recovery of the housing market.

business inventory variation saw its contribution to the GDP quarter reassessed at +0.7 (+0.5 points in the first estimate), a high level equivalent to that of the third quarter and is likely to be corrected for coming quarters.

the 0.6% increase in purchases of household goods in January after another in December revised up to + 1.0%, however, confirms that the consumer is in the process to regain its leading role in French growth after bottoming in the fall.

the return to near normal temperatures, which drive up energy costs but also higher expenses equipment housing fueling the trend.

At the end of January, over growth of household consumption of goods, which contributes nearly 25% to GDP is 0.8%, which confirms the expectations of a solid start to the year for the French economy (consensus + 0.4% for GDP)

(edited by Yves Clarisse)


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