French inflation seems to have risen in August; consumption likely to have rebounded in July

France’s both consumer price index and harmonised index consumer prices inflation are expected to have rise slightly in August. The flash CPI inflation is likely to have come in at 0.4 percent year-on-year after remaining stable in the prior month, said Societe Generale in a research report. Meanwhile, HICP inflation is expected to have improved further to 0.6 percent year-on-year.

The energy component is expected to have stayed flat following a drop in July. But it is likely to have recorded a lower annual decline. Moreover, food prices are seemed to have stabilized in August following 1.1 percent year-on-year rise in July.

Meanwhile, core inflation is expected to have inched up in the month after remaining stable for the past four months. The increase is led by a minor rise in non-energy industrial goods prices as services inflation is likely to have remained stable at 0.9 percent year-on-year.

“Looking ahead, inflation should recover at a faster pace, climbing above 1.0% by the end of the year led by base effects from energy prices”, noted Societe Generale.

On the other hand, consumption in France is expected to have recovered sequentially in July. It is likely to have grown 0.9 percent following monthly declines in May and June, according to Societe Generale. Energy consumption dropped 6.3 percent in June as consumers used down precautionary purchases from May when there were widespread strikes and blockades of refineries. Hence it should have picked up in July again. Non-energy consumption is expected to have stayed stable.

“Assuming a constant profile over the rest of the quarter, our forecast of 0.9 percent mom, or 1.5 percent yoy, would point to 0.2 percent qoq consumption growth in 3Q16”, noted Societe Generale.