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Economy in Brief

France CPI: Energy Brings Down Total Inflation, But Food Prices Have Been Picking Up
by Carol Stone October 13, 2006

Last week, we discussed the CPIs of two small Eastern European countries, who were quick in reporting their September data; in both cases, Estonia and Slovenia, there was evidence that the recent fall in energy prices was already helping cut inflation, and nip a price problem in the bud. Today, we hear from a much larger European economy, France. Sure enough, lined out in some detail, is a clear statement about the fall in oil product prices.

France's CPI has been pretty well behaved all along, and we've commented more than once about how reassuring it has been that so many countries have not suffered a major, sustained acceleration in overall consumer prices. So in one sense, there is little to tell. But that's a good thing. The total CPI did fall in September by 0.3%, seasonally adjusted, after a 0.3% increase in August. Over the last 12 months, the not seasonally adjusted index is up 1.2%, a noticeable slowing from August's 1.9%. Similarly, Germany's data, which came out yesterday, had a 0.1% decline in September and a 12-month increase of just 1.0% after 1.7% in August.

We see from the table that in France the subset excluding energy is marginally firmer for the 12 months, up 1.3%, indicating that weaker energy lowered the total by 0.1% in September; that contribution in August was a +0.5%, so the latest is a significant turnaround. Energy prices themselves dropped 2.6% in the month alone and oil products, 4.3%.

This helped reduce other line items, of course. Transportation costs were up a mere 0.6% from a year earlier after a 3.5% advance in August, while housing -- which includes utilities in the French layout -- was up 3.8% in September from a year ago, much less than August's 4.7%.

Prices of some things remain troublesome, most notably food. Food prices, in France and elsewhere, have been picking up. The 12-month rise was 2.7% in September, following 2.4% in August and just 0.8% across 2005. The same is true in Estonia, where the category was up 7.5% in September from a year ago and in Slovenia where it was up 3.8% in September and 4.7% in August compared with 0.8% over 2005. Among the larger economies, in Germany, food was up 3.1% in September; it had also risen just 0.8% during 2005.

So we seem to face a rolling-kind of inflation evolution. The total inflation rate in several countries is remaining remarkably calm, but relative prices are all over the board. This is healthy. Some sector is always "troublesome" and that keeps people, merchants and policymakers vigilant. But economies are increasingly flexible, so that the trouble in one area is met with adjustment elsewhere instead of just battering its way through everything. We hope this situation holds; it will be good for the general welfare if it does.

France CPI, % Changes, NSA ex as Noted
Sept 2006 Aug 2006 Sept 2006 Aug 2006 2005 2004 2003
All Items, SA -0.3 0.3 -- -- -- -- --
All Items -0.2 0.3 1.2 1.9 1.5 2.1 2.2
Ex Energy 0.0 0.3 1.3 1.4 1.1 1.5 2.4
Energy -2.6 0.6 1.0 7.2 8.2 10.2 -0.1
  Oil Products -4.3 0.6 -2.1 7.2 11.1 16.4 -0.5
Transportation -1.8 0.3 0.6 3.5 3.7 4.5 1.9
Housing 0.0 0.4 3.8 4.7 4.4 4.5 2.1
Food 0.4 -0.5 2.7 2.4 0.8 0.0 2.4
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