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Economy in Brief

French Long-term HICP Trend Moves Lower
by Robert Brusca August 14, 2007

3-month inflation shifts much lower.

French inflation trends show France’s contribution to the Euro area’s inflation trends are middle of the road. France is still not in great shape but it is not one of the problem countries on the inflation side. And France has seen its GDP slow unexpectedly in the second quarter. The French stock market remains one of the very weakest in Europe. We are for the first time getting some consistent signs of slowing from Europe. It’s too soon to say if they will last or not.

The trouble for the ECB is going to be sorting out the disparate trends. It will have to deal with its previous hint that it was set to hike rates and compare it to actual current needs. Financial markets events work to put the ECB on hold. And then there is the GDP picture which was not as strong in Q2 as had been expected across the Euro area. The moderation of inflation trends feeds a third development into this mix that also comes out on the side of pushing the ECB to stay its hand.

This by the way is not a isolated position for the ECB. Japan’s central bank is in a similar fix for all the same reasons.

France HICP and CPI details
  M/M % SAAR % Year/Year
  Jul-07 Jun-07 May-07 3-Mo 6-Mo 12-Mo Yr Ago
HICP Total 0.0% 0.2% 0.2% 2.0% 2.1% 1.2% 2.2%
Core #N/A 0.1% 0.1% #N/A #N/A #N/A 1.5%
 
CPI: All Items 0.1% 0.2% 0.2% 1.7% 1.8% 1.1% 2.0%
CPI ex Food & Energy 0.1% 0.1% 0.1% 1.1% 1.2% 1.3% 1.4%
Food -0.2% 0.5% 0.1% 1.9% 0.4% 0.8% 2.1%
Alcohol 0.3% 0.4% 0.4% 4.5% 3.4% 0.6% 0.2%
Clothing & Shoes -0.7% 0.2% 0.2% -1.4% 1.2% 0.2% 0.2%
Rent & Utilities 0.2% 0.5% 0.0% 2.7% 3.4% 2.4% 4.8%
Health Care 0.4% 0.0% -0.1% 1.1% 0.3% 0.4% -0.2%
Transport 0.2% 0.4% 0.7% 5.0% 6.1% 1.5% 4.0%
Communication 0.0% -0.1% 0.1% -0.1% -3.8% -0.6% -6.2%
Recreation & Culture -0.2% 0.1% -0.3% -2.0% -0.9% -1.6% -0.9%
Education 0.2% 0.2% 0.2% 2.9% 2.7% 2.4% 2.8%
Restaurant & Hotel 0.5% 0.3% 0.2% 4.4% 3.7% 2.9% 2.3%
Other 0.0% 0.1% 0.3% 1.7% 1.8% 2.0% 3.2%
 
        6-mo 12-mo Yr-Ago  
Diffusion       54.5% 63.6% 45.5%  
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