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Economy in Brief

French Inflation Turns Higher But Not Really...
by Robert Brusca October 12, 2007

The graph on the left paints a clear picture of French inflation turning higher in September 2007.And year/year inflation did just that. Yet inflation in France is not really accelerating. The year/year jump is due to an adverse base effect - the fact that a year ago inflation had fallen making this month’s year/year a tougher comparison. When we instead look at 3-month inflation compared to 6-month inflation we see that the rate of inflation is back down from 2.7% to 1.8%.. Diffusion calculations also confirm that inflation remains under wraps. Diffusion calculates the percentage of main sectors in which inflation has accelerated in a period. What we find is that for the 3-month to 6-month inflation comparisons diffusion is 27.3 which is below the neutral level of 50. Indeed at this level we can see that inflation is in fact decelerating in many more sectors than it is accelerating. Inflation in France seems under control despite the unfortunate accompanying chart.It is more unfortunate that the chart is the main way that inflation watchers view inflation.

The table below shows the diversity in French inflation trends with one main thing in common: that inflation is mostly decelerating at least from 6 months to 3 months.Year-over-year, most sectors confirm that inflation IS higher although the headline is barely higher at 1.6% compared to 1.5% a year ago.

France HICP and CPI details
  Mo/Mo % Saar % Yr/Yr
  Sep-07 Aug-07 Jul-07 3-Mo 6-Mo 12-Mo Yr Ago
HICP Total 0.1% 0.3% 0.0% 1.8% 2.7% 1.6% 1.5%
Core #N/A 0.3% 0.0% #N/A #N/A #N/A 1.2%
CPI
All 0.0% 0.3% 0.1% 1.6% 2.4% 1.5% 1.3%
CPI ex F&E 0.1% 0.4% 0.1% 2.2% 2.2% 1.5% 1.3%
Food 0.6% 0.7% -0.2% 4.8% 5.0% 1.3% 2.7%
Alcohol 0.7% 2.9% 0.3% 16.5% 10.2% 3.9% 0.3%
Clothing & Shoes 0.4% 0.3% -0.7% -0.2% 0.3% 0.9% 0.2%
Rent & Utilities 0.3% 0.1% 0.2% 2.5% 3.5% 2.7% 3.8%
Health Care 0.1% 0.1% 0.4% 2.5% 0.7% 0.3% 0.2%
Transport 0.1% -0.4% 0.2% -0.5% 3.0% 2.4% 0.6%
Communication 0.2% 0.5% 0.0% 2.8% 0.7% 0.2% -6.2%
Recreation & Culture -0.7% -0.1% -0.2% -3.8% -1.8% -1.5% -1.6%
Education -0.1% 0.1% 0.2% 0.9% 1.7% 2.1% 2.6%
Restaurant & Hotel -1.0% 0.8% 0.5% 1.3% 2.3% 2.8% 2.3%
Other 0.2% 0.1% 0.0% 1.3% 2.0% 1.9% 3.2%
Diffusion       27.3% 63.6% 63.6%  
Type: Diffusion Compared to 6-mo 12-mo Yr-Ago  
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