French and Spanish final March HICP inflation likely to confirm flash readings

France’s final HICP inflation for March is expected to confirm flash reading of -0.1% y/y, according to Societe Generale. According to the flash reading, a further drop in energy prices was registered at 7% y/y, after declining 6.8% y/y in February. However, on a monthly basis, the prices rose after declining for nine consecutive months. Food inflation accelerated slightly to 0.4% y/y, supported by recovery in fresh foods prices.

Amongst core components, service inflation continued to be stable at 0.8% y/y, whereas manufactured products’ prices weakened slightly to -0.2% y/y. However, manufactured products’ prices rose on a monthly basis.

“Looking ahead, we expect the French HICP inflation to average 0.4% in 2016 and 1.7% in 2017. We expect the core metric to be 0.9% in 2016, before rising to 1.3% in 2017”, noted Societe Generale.

Meanwhile, Spain’s final HICP inflation for March is also expected to remain unchanged from flash readings of -1%. According the flash release, the annual rate behaviour is explained by an increase in gasoline and diesel prices, along with rise in non-alcoholic beverages and stable food prices, as compared with the decline in 2015. Spain’s HICP inflation is expected to remain negative in the following months and pick-up noticeably in the last few months of 2016 due to positive base effects, according to Societe Generale.

“We forecast average HICP inflation at 0.0% in 2016 and 1.6% in 2017. The core metric should average 0.8% in 2016 and 1.1% in 2017”, added Societe Generale.