France economy: Inflation slows sharply in November

Event 

The national index of consumer prices fell by 0.2% month on month in November 2012, bringing the annual rate of inflation down to 1.4%, from 1.9% in October. According to the EU harmonised measure, annual inflation edged down to 1.6%, from 2.1% in October.

Analysis

Inflation slowed sharply last month to stand at the lowest rate for more than two years. The decline is largely explained by trends in energy prices, which rose at an annual rate of just 2.7% in November, from 5.2% in October and over 11% in November 2011. Increases in transport fuel prices in particular have eased. Added to this is a slower pace of annual food price inflation, which eased to 2.6% in November.

Further downward pressure on overall inflation has come from falling prices for transport and telecommunications services, which were 7.5% lower over the year to November. This is largely attributable to the arrival of a new competitor, Free, in the market for mobile telephony at the beginning of this year. Thus, telecommunications prices fell by 3.3% in November alone, compared with October, or by 15.1% compared with November 2011. Air fares are also trending downwards, reflecting competition in the long-haul sector.

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