By Gianluca Lo Nostro
(Reuters) – French inflation fell to its lowest level since December 2020 in May, driven by a sharper decline in energy prices and a slowdown in service costs, preliminary data from statistics agency INSEE showed on Tuesday.
France’s harmonized consumer prices, adjusted for comparison with other euro zone countries, increased 0.6% year-on-year in May, down from a 0.9% rise in April.
That marked the lowest inflation rate yet this year and the lowest for France since December 2020 when prices were flat.
A Reuters poll of 21 analysts had on average expected a rate of 0.9%, with estimates ranging from 0.7% to 0.9%.
Service prices rose 2.1% on the year in May, slowing down from 2.4% in April. INSEE attributed this to slower growth in transport prices and a more pronounced decline in communication costs.
Energy prices fell 8.1% compared with May 2024, steeper than April’s 7.8% drop and the fourth consecutive monthly decline, as gas prices continued to fall.
Food prices rose 1.3%, a slight acceleration from 1.2% in April, while prices of manufactured goods remained in a negative territory at -0.2%, unchanged from the previous month. Tobacco price inflation held steady at 4.1%.
Inflation measured by France’s own consumer price index rose 0.7% over the year through May, down from 0.8% in April.
Tuesday’s data is another very encouraging sign of disinflation in action, said Francois Villeroy de Galhau, an European Central Bank policymaker and the head of the Bank of France.
Villeroy had said earlier in May that another ECB interest rate cut may be due before the summer. (This story has been refiled to fix the spelling of ‘disinflation’ in paragraph 9)
(Reporting by Gianluca Lo Nostro, Olivier Cherfan in Gdansk; Editing by Milla Nissi-Prussak)
