French and Spanish Inflation Was Below Forecasts in August
Inflation in France and Spain was a touch less than expected this month, though the data suggest price growth for the euro zone as a whole is unlikely to deviate much from the European Central Bank’s 2% target.
The French reading came in at 0.8% due to a slowdown in services. In Spain, the number was 2.7%. Both were 0.1 percentage point below the median estimates in Bloomberg surveys.
While French price pressures are weaker than in most of the euro area and those in Spain are stronger, the ECB is satisfied with the picture in the wider region.
With the economy also proving resilient in the face of US trade volatility, policymakers in Frankfurt are expected to keep interest rates steady at 2% for a second month in September. Investors are no longer fully pricing any further cuts this year.
An ECB poll published Friday shows little in the way of inflation worries among the continent’s consumers. Expectations for the next 12 months held steady in July and only edged up slightly for three years ahead.
Friday will see the region’s four biggest economies all report price data for August, with Italy and Germany set to come in at or around 2%. Figures from the 20-nation euro zone are due Tuesday.
France’s economy has lost momentum compared with peers as prolonged political and fiscal uncertainty led to declines in corporate investment and soft domestic demand. Spain, on the other hand, can boast the region’s best-performing major economy.
France’s outlook became much more uncertain this week after Prime Minister Francois Bayrou’s surprise call for a confidence vote over his budget plans — a move that’s likely to trigger another government collapse.
The preliminary consumer-price data for August showed inflation in services — a sector that’s closely watched by the ECB — slowing to 2.1% from 2.5% the previous month. Manufactured goods prices fell 0.3% — the sixth consecutive negative reading. Energy also weighed with a 6.2% drop, though that was slightly less than in July.
A separate report Friday from Insee showed consumer spending in July fell 0.3% from June on declines in outlays for energy and clothing. The outcome was in line with expectations.
Source : Bloomberg
