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Energy and manufacturing product prices also contributed to higher inflation in January, as France continues to deal with increased political upheaval.
ADVERTISEMENTJanuary’s annual inflation rate was up 1.7%, above market estimates of 1.4% and higher than December’s figure of 1.3%, according to official figures from INSEE.The increase was mainly by a rise in services prices, up 2.5% on the same time last year and 2.2% on December. Energy prices were also higher, jumping 2.7% last month, up from 1.2% in December. Similarly, there was a rebound in manufactured goods prices, although food prices were mostly stable. However, tobacco price rises slowed in January. On a month-on-month basis, inflation inched up 0.2% in January, the same as December. That was also due to increased services prices.Energy prices also advanced on a monthly basis, rising 1.6% in January, up from 0.7% in December, mainly boosted by petroleum product prices, as well as gas prices. There was also a rebound in food prices, which inched up 0.3% in January, following a fall of 0.1% in December, with tobacco prices also increasing. However, manufactured product prices fell on a monthly basis, mainly because of winter sales. However, economic and political concerns still remain for France, which has been dealing with higher political upheaval following the collapse of the government in a no-confidence vote back in December 2024. Kyle Chapman, FX markets analyst at Ballinger Group, said in a note: “The jump in French headline CPI in January primarily came down to the more volatile components of the index, including food and energy. “The core measure was relatively steady and sits well below the 2% target, as it has done for some time. For the ECB, cooler and less inflationary economies like France are less concerning than the likes of Germany and Spain.”Domestic demand expected to boost French economy in 2025Domestic demand is expected to help support the French economy this year, according to the European Commission’s economic forecast for France. This will mainly be due to higher real wages, as well as disinflation. However, private investment is expected to be sluggish in 2025, as the changes to monetary policy take time to trickle down. Ongoing political and economic uncertainty in France is likely to contribute to this situation as well. Economic activity is expected to pick up pace in 2026, with gross domestic product (GDP) expected to grow to 1.4%, from an expected 0.8% this year, mainly boosted by credit cost falling further. Higher private domestic demand and private investment is also likely to support this figure. Inflation is expected to average about 1.9% this year, before falling slightly to 1.8% in the next year, according to the European Commission.
