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Economy in Brief

CPI Inflation Slows Further in France for December, Still Restrained in Spain, Finland and Slovakia
by Carol Stone January 13, 2006

Inflation was modest across four European countries as 2005 ended, according to CPI data reported today. In France, the total index rose 0.2% in December from November and 1.5% from December 2004. This was even slower than the 2.1% in 2004. France's CPI excluding energy slowed for the year by a similar amount, to 1.1% from 1.5% across 2004. The slowing is concentrated in manufactured products, for which prices fell more than in 2004, and even in services, which rose 2.8% across 2005, less than the 3.3% in 2004.

Consumer prices also moderated in Slovakia, although it has a much more inflation-prone economy. The index was up 0.6% in December, putting the year at 3.7%, markedly less than the 6.0% in 2004. The slowing was widespread, but variable. Housing and related expenses, for instance, were up 10.8%, but this was not as much as 13.8% in 2004. Price categories that firmed did so by decreasing less than they had in 2004, including such basic items as clothing and furniture. Even transportation costs rose more slowly, 3.3% versus 5.7%.

2005 inflation picked up in two other countries, however, Spain and Finland. In Spain, the total CPI rose 0.3% in the month of December and 3.8% across 2005; the yearly rate was 0.6 percentage point more than in 2004. Higher energy costs were surely an ingredient, but core inflation also rose, from 2.7% in 2004 to 3.1% last year. Finland, characterized by low CPI inflation generally, nonetheless saw its pace more than double last year to 1.0% from 0.4% in 2004. This seems to have been concentrated in alcoholic beverage prices, which fell in 2004 and then stabilized in 2005; other categories had variable price performance.

In all of these cases, large economies and small, highly developed and transitioning from socialism, inflation rates are generally restrained. "Inflation" is defined as "generalized" price increases throughout an economy, but all four of these have uneven price behavior both across categories and across time. So inflation remained well under control in Europe through 2005, a remarkable development after two years of notable energy price increases, and in those using the euro, a weakening currency for much of that time.

CPI (% Change)
( NSA except as noted)
Dec 2005 Nov 2005 Oct 2005 2005 2004 2003 2002
France (Months SA) 0.2 -0.1 0.0 1.5 2.1 2.2 2.3
  ex Energy 0.3 0.1 -0.1 1.1 1.5 2.4 2.1
Spain 0.3 0.2 0.8 3.8 3.2 2.6 4.5
  ex Energy 0.4 0.5 1.0 3.1 2.7 2.9 4.3
Finland 0.1 -0.3 -0.1 1.0 0.4 0.6 1.7
Slovakia 0.6 0.5 1.5 3.7 6.0 9.2 3.4
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