Driven by a drop in electricity prices, the consumer price index fell to 0.8% in February, after +1.7% in January, according to a flash estimate by French statistics office Insee. On a monthly basis, prices haven’t changed in France.
The EU harmonised index is only slightly higher, 0.9% for February compared with last year.
The slowdown in inflation in the EU’s second-biggest economy is fuelling further expectations that the European Central Bank (ECB) will cut the deposit rate by another 25 basis points to 2.5% next week.
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The very low inflation in February 2025, the lowest since February 2021, is explained in particular by the fall in electricity prices”, said chief economist Sylvain Bersinger from Paris-based economic consultant Asterès.
After two years of successive increases, an average fall of 15% in electricity prices took effect on 1 February for more than 24 million subscribers. The energy inflation sat at -5.7% in February compared with last year.
On the other hand, food prices increased slightly over one year, unlike service prices which slowed. Manufactured products and tobacco also slowed down but to a lesser extent.
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“In the coming months and quarters, inflation is not expected to remain at such a low level due to slightly inflationary developments in the production chain,” said Bersinger adding that “inflation is expected to rise slightly in spring 2025, while remaining below 2%.”
He expects industrial production prices to start climbing after showing no change in January 2025, and a further rise in agricultural production prices.
Bersinger maintained: “the slowdown in wage growth will prevent inflation from rebounding sharply. While wages had increased by more than 5% year-on-year in the fourth quarter of 2022, the increase was only 2.1% in the fourth quarter of 2024. This development, expected due to the fall in inflation, will limit the rise in business costs, and therefore the rise in prices”.
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Leading EU economies are facing different inflation trends
French inflation figures in February stand out from other European countries. In Spain, inflation climbed to 2.9% over one year this month.
In Germany, the EU-harmonised inflation was 2.8%, unchanged for the third consecutive month, according to the Federal Statistical Office Destatis. On a monthly basis, prices increased by 0.6%, the EU-harmonised index showed.
In Italy prices jumped by 1.7% compared with last year, according to the Italian Statistics Office ISTAT’s preliminary estimates, which is the highest inflation rate since September 2023.
Italian prices increased by 0.2% in a monthly comparison, the EU harmonised rate was 0.1%
Ireland has also reported its latest inflation figures, which showed a subdued price pressure in the country. In a monthly comparison, prices increased by 0.7% in February from -0.7% in the previous month, according to the EU harmonised figures. Annual inflation came in at 1.3% as compared with 1.7% in January.
It is not only inflation that slowed down in France, but the economy too
On a quarter-by-quarter basis, the French economy contracted by 0.1% in the last three months of 2024, confirming Insee’s preliminary estimates. This compares to an expansion of 0.4% in the previous three months which was partly due to the Paris Olympic and Paralympic Games boosting growth.
In the last three months of 2024, household consumption growth slowed to +0.3%, and this trend continued in January 2025 too according to separate data by Insee, showing a drop of 0.5% month-on-month.
The French GDP was also dragged down at the end of last year by the declining numbers of fixed investment led by a drop in construction investment.
Exports and imports both rose by 0.4%.
On an annual basis, the economy expanded by 0.6%, slightly below the flash estimate of 0.7%, marking the slowest yearly growth since the last annual contraction at the end of 2020.
For the full year of 2024, the French GDP grew by 1.1%, just like it did in the previous year.
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