Wall Street Times

Inflation slows down in France at the end of August

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The UK economy avoided stagnation, rising by 0.2% between April and June, while France’s inflation decreased to 4.3% in July, its lowest level since February of last year.

On Friday, there was encouraging news for two of Europe’s largest economies: France’s inflation fell to its lowest level since February 2022 in July, and the UK avoided stagnation after reporting a slight 0.2% rise between April and June.

France’s consumer price inflation decreased last month from 4.5% in June to 4.3%, with energy prices declining 3.7% on a yearly basis. Contrarily, food costs were still 12.7% higher in July 2023 than they were a year earlier, while being lower than the 13.7% increase seen in June.

In the past year, the cost of transportation increased by 5.4%, while the cost of communication services has decreased by 6.1%. Over the previous year, the category “rents, water, and household waste collection” has climbed by 3.1%. On an annual basis, cigarette prices increased by 9.8%.

Core inflation, which excludes items with extremely variable prices and those subject to government intervention, decreased from 5.7% in June to 5.0% in July. 

Despite the decline, France’s inflation rate is still much higher than the desired range of close to but below 2% set by the European Central Bank.

The UK has managed to escape formally entering what is known as stagnation, which is a protracted period of little or no growth. The country has been struggling with inflation that is greater than much of Western Europe at 7.9% in the year leading up to June 2023.

The country’s economy just grew by 0.2% in the second quarter of the year, which is stronger than both the first three months of the year and what experts had predicted.

According to Darren Morgan, the Office for National Statistics’ (ONS) director of economic data, “the manufacturing sector had a particularly strong month,” particularly in the automobile and pharmaceutical industries.

The building, lodging, and food industries benefited from June’s warm weather as well.

Finance Minister Jeremy Hunt stated that “the steps we are taking to combat inflation are beginning to pay off” and that “the Bank of England now expects us to avoid a recession.”

The UK continues to have the highest rate of inflation among the G7 nations.

Eurozone inflation drops in July as economic growth accelerates

The eurozone’s inflation rate decreased to 5.3% in July from 5.5% the previous month. Since January 2022, before the Russian invasion of Ukraine gave birth to protracted economic uncertainty, the lowest amount of inflation has been recorded.

However, core inflation, which gives a more precise indication of underlying pricing pressures, held steady at 5.5% from June. 

Compared to June, annual food, alcohol, and cigarette inflation slowed to 10.8% from 11.6%, while prices for energy and industrial products also decreased. However, inflation in the services sector increased slightly to 5.6% from 5.4% in June.

Alarmingly high inflation rates continue to exist in several nations. Slovakia had the highest inflation last month among the 20 euro-area nations, at 10.2%, followed by Croatia (8.1%) and Lithuania (7.1%).

Although it has decreased overall, inflation is still significantly higher than the European Central Bank’s (ECB) target of 2%, which is in line with past economic forecasts.

In an effort to limit inflation, the ECB raised interest rates last week for the ninth time in a row, reaching their highest levels in 23 years. 

However, the data on core inflation do not provide assurance that the increases in interest rates are having the expected effect.

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Interest rates will keep rising, according to ECB president Christine Lagarde, until the underlying pressures on consumer prices start to ease.